- Equity Bank, KCB and Co-op Bank Kenya are among the first lenders to adjust their loan rates following a reduction in the base rate by the Central Bank of Kenya (CBK).
- The Central Bank has called on all lenders to adopt the new base interest rate in order to boost borrowing by the private sector and stimulate economic growth.
- Kenya Bankers Association (KBA) CEO Raimond Molenje welcomed the move by lenders to reduce loan fees, explaining to .co.ke that it is part of their commitment to economic growth.
Kenyan commercial banks are currently putting into effect the Central Bank of Kenya's recently issued interest rate guidelines.
The Central Bank of the country reduced the base lending rate to 10.75% in February 2025, down from 11.25% in December 2024.
What are the Central Bank's instructions to banks?
The regulator pointed out that lenders failed to reduce interest rates as instructed in previous monetary policy guidelines.
Central Bank of Kenya governor Kamau Thugge disclosed an ongoing examination to ensure commercial banks are enforcing the changes.
"If we adopt a risk-based credit pricing model, there is no justification for lending rates to the private sector not to decrease. That is our proposal, let's conduct on-site inspections of the banks to ensure they are implementing the necessary changes," said Thugge.
What do Kenyan bankers think about loan fees?
Kenya Bankers Association CEO Raimond Molenje described the speed at which commercial banks are implementing the CBK's new rates as a commitment to making credit more affordable.
Molenje observed that there will be a rise in lending to the private sector, a development that is set to revitalize the country's economy.
"Banks are committed to making lending rates affordable for Kenyans and businesses. Reducing loan rates will make it easier for the private sector to access credit, which will boost business activities," said Molenje.
The CEO pointed out that lower loan rates are beneficial for customers as they can better manage their loan repayments, and also enable lenders to lower the proportion of unfulfilled loan obligations.
In January 2025, KBA called on CBK to lower the base interest rate further, citing a rise in non-performing loans, which prevents banks from quickly adjusting their lending rates, thereby limiting credit expansion.
"The year 2025 is expected to experience significant resurgence and expansion. We recommend that Kenyans and entrepreneurs explore various financial facilities offered by banks to grow and succeed in the current low-interest rate environment," Molenje advised.
Which banks are offering affordable loan options in February 2025?
1. Family Bank
Effective March 1, 2025, Family Bank Kenya reduced its annual loan interest rate from 17.25% to 15.95%.
The lender stated that the new loan fees will be determined by a risk-based pricing model, in which an extra interest rate will be added based on the borrower's creditworthiness.
2. NCBA Bank
Customers visiting NCBA Bank for loan facilities will benefit from a reduction of 1.57% in the interest rate.
The bank reduced its Kenya shilling-denominated loan interest rates from 16.91% to 15.34% per year, starting from February 16, 2025.
3. Absa Bank
Absa Bank stated that it lowered its annual interest rate from 16.5% to 13.5% in January 2025, as a result of adjustments to the Central Bank Rate.
The lender also reduced the Risk-Based Pricing by 1% effective on March 13, 2025.
4. Standard Chartered
Standard Chartered Bank also lowered its loan fees following the Central Bank of Kenya's new base lending rate of 10.75%.
The lender informed its clients that it reviewed and revised the CBR Benchmark for all associated facilities.
5. Equity Bank Kenya
Equity Bank reduced its shilling-denominated loan fees by 3 percentage points to 14.74% in accordance with regulatory guidelines.
The lender stated that the new interest rate will come into effect on February 13, 2025, for new loan applications and on March 1, 2025, for existing loan balances.
6. KCB Bank
Kenya Commercial Bank (KCB) has also stated that it will be lowering its annual loan interest rates from 15.6% to 14.6%.
KCB announced that the new interest rates will come into effect on February 10, 2025, for new loans denominated in shillings and on March 10, 2025, for existing loan facilities.
7. Co-op Bank Kenya
Co-operative Bank of Kenya became the first lender to comply with the Central Bank of Kenya's directive, reducing its loan interest rate by 2% from 16.5% to 14.5% per annum.
The bank stated that the loan fees will be calculated with a margin ranging from 0% to 4% annually, based on the borrower's credit score.
8. Stanbic Bank
Stanbic Bank announced a decrease in its loan interest rate on February 14, 2025.
The bank has reduced its loan fees for both existing and new loan facilities from 17% to 15.5%, starting from March 19, 2025.
9. I&M Bank
I&M Bank will be lowering its loan fees for Kenyan shilling lending by 2% as of March 1, 2025.
The lender previously announced a cut in interest rates of 0.5%, which will take effect on December 23, 2024, following a 0.25% reduction that was implemented on Thursday, November 28.
Kenyan bankers are urging the government to adopt a sustainable tax policy to boost the country's economy.
The KBA CEO recommended that the government maintain a stable business environment with fair tax policies to achieve the benefits of reduced interest rates.
We strongly advise the government to maintain a stable and predictable tax system and avoid any unexpected tax changes for the benefit of Kenyans and businesses. A stable and predictable tax environment fosters confidence in the economy, which is essential for long-term investment.
In January 2025, Kenyan business owners cautioned the government against imposing heavy taxes on companies and employers.
Kenya Federation of Employers (FKE) Executive Director Jacqueline Mugo pointed out that employees are overworked, while at least 57 employers have dismissed their workers.
* Nominal interest
- The Central Bank of Kenya's decision on the base lending rate triggered a heated debate among Kenyans, who shared their personal experiences of accessing credit from their banks.
- Since November 2024, commercial banks have been transitioning their lending rates to align with the base Central Bank Rate (CBR).