Relief for borrowers as another big lender lowers its loan rates
KCB Group, Kenya’s largest bank by assets, has become the second major lender to reduce its lending rates, following the lead of rival Co-operative Bank.
This strategic move is set to provide substantial relief for borrowers amid the ongoing economic cash crunch. In a public notice yesterday, KCB said the reduction in its base lending rate would apply effective February 10 for new loans and March 10 for existing ones.
The bank will lower its base lending rate from 15.6 per cent to 14.6 per cent per annum for new loans, a change that comes as many consumers struggle with rising costs of living.
KCB’s decision follows Cooperative Bank’s move on Monday, which saw its base lending rate drop from 16.5 per cent to 14.5 per cent.
Both banks are responding directly to the Central Bank of Kenya’s (CBK) recent adjustments to the Central Bank Rate (CBR), which was lowered by 50 basis points to 10.75 per cent to stimulate credit growth in the face of economic challenges.
This reduction by Co-op Bank and KCB signifies a growing trend in the banking sector where lenders are increasingly pressured to lower their rates to remain competitive.
Analysts predict that this could catalyse further rate cuts across the industry, offering timely relief to borrowers facing escalating living expenses. In its announcement, KCB said it is committed to enhancing credit accessibility for its customers. The new lending rates will be determined based on a customer-specific margin, in line with the approved Risk-Based Credit Pricing Model (RBCPM).
This approach aims to ensure that the benefits of the rate cuts reach a diverse range of customers, including individuals and businesses, particularly Micro, Small, and Medium Enterprises (MSMEs).
“The reduction in lending rates is designed to stimulate credit growth, especially in sectors vital for economic recovery,” KCB said.
Reactions from borrowers have been overwhelmingly positive, with many viewing the rate cuts as a crucial step toward alleviating financial burdens.
Customers are eager for the implementation of the new rates, anticipating improved access to credit for both personal and business needs.
As KCB and Co-op Bank set the pace, scrutiny now falls on other banks such as Equity Bank and NCBA to adjust their lending rates.
The CBK has voiced concerns over the slow pace of rate reductions, stressing the necessity for banks to act and ensure that the benefits of monetary policy are passed on to borrowers. Governor Kamau Thugge has underscored the urgency of reducing rates in light of significant CBR cuts. With Co-op Bank and KCB’s announcement, attention shifts to the broader banking sector, where pressure is mounting for other lenders to follow suit.
Borrowers are hopeful that these new rates will herald a trend toward more affordable borrowing options. “The committee observed that while the CBR has been substantially lowered, lending rates have only decreased marginally,” said Governor Thugge. “Banks are expected to take necessary steps to further lower their lending rates, stimulating growth in credit to the private sector.”
