Banks Announce Cheaper Loans Following CBK Rate Reduction

Kenyan banks have announced that they will begin reducing the interest rates on loans beginning this month.

In a statement on Sunday, December 8, the Kenya Bankers Association (KBA) disclosed that banks are taking the step to ensure borrowing is affordable.

KBA declared that individual banks are issuing notices indicating the reductions and that the reductions will continue progressively in line with credit risk factors.

“The recent successive cuts in the Central Bank Rate, have implications on both deposit and lending rates in the market. Banks are taking steps to lower interest rates and make borrowing more affordable.

"Individual banks are issuing the requisite notices to customers indicating reductions in loan rates from December 2024, and these reductions will continue progressively in line with the evolution of monetary policy and credit risk factors," KBA Chairman John Gachora remarked. 

He added that each bank is mandated to assess the risk profile of its customers and price its loans accordingly, based on each bank's approved base rates and assessment of the risk premium.

"While the base rates primarily reflect the Central Bank Rate and the cost of borrowing by the government, the customers’ risk premiums mirror the market conditions such as the level of non-performing loans and any challenges that customers face that may constrain their ability to service loans," Gachora stated.

On December 5, the Central Bank of Kenya (CBK) reduced the Central Bank Rate (CBR) from 12 percent to 11.25 percent.

The regulator said that the Monetary Policy Committee (MPC) decided to cut the interest rate due to stable inflation and exchange rate stability.