TUKO.co.ke journalist Wycliffe Musalia has over six years of experience in financial, business, technology, and climate reporting, which offers deep insights into Kenyan and global economic trends.

Kenya's commercial banks are now implementing the Central Bank of Kenya (CBK) new interest rate directives.

CBK lowered the base lending rate to 10.75% in February 2025, from 11.25% in December 2024.

The regulator cited laxity among lenders in lowering interest rates during the previous monetary policy directives.

CBK governor Kamau Thugge revealed an ongoing inspection to make sure that commercial banks are implementing the changes.

"If we just follow the risk-based credit pricing model, there is no reason why the lending rates to the private sector should not come down. That is what we are saying, let us do some onsite inspection of the banks to make sure they are following up of the changes," said Thugge.

In an exclusive interview with , Kenya Bankers Association (KBA) CEO Raimond Molenje described the pace at which commercial banks are implementing the CBK's new rates as a commitment to realising affordable credit.

Molenje noted that there will be an increase in lending to the private sector, a move that is poised to revive the country's economy.

"Banks are committed to realising affordable lending rates to Kenyans and businesses. reducing loan rates will unlock access to credit and increase loan uptake by the private sector, which will enhance activities," said Molenje.

The CEO noted that lower loan rates enhance the ability of customers to service loans and help lenders reduce the ratio of non-performing loans (NPLs).

In January 2025, KBA urged CBK to further scale down the base interest rate, citing increased NPLs, which hinder banks from making swift adjustments in lending rates, thereby restricting credit expansion.

"The year 2025 will see much revival and growth. We urge Kenyans and businesses to engage banks for different facilities to scale and thrive in the reduced interest rate regime," Molenje advised.

Family Bank Kenya lowered its loan interest rate from 17.25% to 15.95% per annum, starting March 1, 2025.

The lender said the new loan fees will be based on the risk pricing model where an additional margin rate will be applied based on the customer credit risk.

Customers visiting NCBA Bank for loan facilities will enjoy a 1.57% drop in interest rate.

The bank lowered its Kenya shilling-denominated loan fees from 16.91% to 15.34% per annum, with effect from February 16, 2025.

Absa Bank said it reduced its interest rate in January 2025 from 16.5% to 13.5% per annum, following the changes in the Central Bank Rate (CBR).

The lender also reduced the Risk Based Pricing (RBP) by 100 basis points effective on March 13, 2025.

Standard Chartered Bank also reduced its loan fees after the CBK's new base lending rate of 10.75%.

The lender announced to its customers that it reviewed and amended the CBR Benchmark for all linked facilities.

Equity Bank adhered to the regulator's directives, lowering its shilling-denominated loan fees by 300 basis points to 14.39%.

The lender said the new rate will take effect on February 13, 2025, for new loans and from March 1, 2025, for existing loans.

Kenya Commercial Bank (KCB) also announced a reduction in its loan interest rates from 15.6% to 14.6% per annum.

KCB said the new rates will take effect from February 10, 2025, for new shilling-denominated loans and from March 10, 2025, for existing facilities.

Co-operative Bank of Kenya became the first lender to adhere to the CBK directive, cutting its loan interest rate by 2% from 16.5% to 14.5% per annum.

The bank said the loan fees will be calculated plus a margin of between 0% to 4% per year, based on the borrower's credit score.

Stanbic Bank announced a reduction in its loan interest rate on February 14, 2025.

The bank lowered its loan fees for existing and new facilities from 17% to 15.5%, effective March 19, 2025.

I&M Bank announced a reduction in loan fees for its Kenya shilling lending rate by 2% effective March 1, 2025.

The lender had earlier announced a reduction of its interest rates by 0.5%, effective December 23, 2024, following a 0.25% reduction implemented on Thursday, November 28.

Meanwhile, the KBA CEO urged the government to sustain a stable business environment supported by fair taxation to realise the gains in reduced interest rates.

"We urge the government to sustain a stable and predictable tax environment and avoid tax surprises to Kenyans and businesses. Tax stability and predictability provide confidence in the economy for long-term investment," he explained.

In January 2025, Kenyan employers warned the government against instituting high taxation on businesses and employers.

Federation of Kenya Employers (FKE) Executive Director Jacqueline Mugo noted that employees are overburdened, while at least 57 employers have sacked workers.

Source: TUKO.co.ke