Kenya Business Financial institution (KCB), Kenya’s largest financial institution with an asset base of KES 1.4 trillion ($10.8 billion), has lowered its lending price from 15.6% to 14.6%, efficient February 10, 2025. This transfer follows mounting strain from the Central Financial institution of Kenya (CBK) asking industrial banks to chop lending charges in response to reductions within the benchmark price.
“The ultimate lending price is predicated on a customer-specific margin, adjusted to the bottom price, in step with the authorized Threat-Primarily based Credit score Pricing Mannequin,” KCB stated in a press release seen by TechCabal. “This is applicable to all current and new KShs-denominated amenities and excludes fixed-rate credit score amenities.”
The CBK has taken an aggressive stance towards lenders who’re reluctant to move on the advantages of decrease borrowing prices to prospects. On February 5, Governor Kamau Thugge stated the regulator has begun bodily inspections of banks to implement compliance. The CBK has additionally invoked penalties beneath the Banking Act and can impose every day fines and hefty monetary penalties on banks that fail to scale back charges.
In the course of the February fifth financial coverage assembly, the regulator reduce the reduce the benchmark lending price to 10.75% from 11.25% and reduce the money reserve ratio to three.25% from 4.25%, releasing KES 73.7 billion ($570 million) into the financial system. Nonetheless, banks had been sluggish to reply, citing increased fastened deposit prices as a constraint.
With debtors struggling beneath costly credit score, the CBK’s intervention goals to stimulate lending, help financial restoration, and enhance entry to inexpensive credit score. Decrease charges might additionally assist banks handle rising non-performing loans, which have begun to say no in key sectors like commerce, actual property, and manufacturing.
KCB’s determination to decrease its charges aligns with this goal, signalling a possible development amongst different lenders to observe swimsuit. The event arrives as non-public sector credit score hit a 22-year low in December 2024, a contraction blamed on expensive loans.