Kenya Commercial Bank (KCB), Kenya’s largest bank with an asset base of KES 1.4 trillion ($10.8 billion), has lowered its lending rate from 15.6% to 14.6%, effective February 10, 2025. This move follows mounting pressure from the Central Bank of Kenya (CBK) asking commercial banks to cut lending rates in response to reductions in the benchmark rate.
“The final lending rate is based on a customer-specific margin, adjusted to the base rate, in line with the approved Risk-Based Credit Pricing Model,” KCB said in a statement seen by . “This applies to all existing and new KShs-denominated facilities and excludes fixed-rate credit facilities.”
The CBK has taken an aggressive stance against lenders who are reluctant to pass on the benefits of lower borrowing costs to customers. On February 5, Governor Kamau Thugge said the regulator has begun physical inspections of banks to enforce compliance. The CBK has also invoked penalties under the Banking Act and will impose daily fines and hefty financial penalties on banks that fail to reduce rates.
During the February 5th monetary policy meeting, the regulator cut the cut the benchmark lending rate to 10.75% from 11.25% and cut the cash reserve ratio to 3.25% from 4.25%, releasing KES 73.7 billion ($570 million) into the economy. However, banks had been slow to respond, citing higher fixed deposit costs as a constraint.
With borrowers struggling under expensive credit, the CBK’s intervention aims to stimulate lending, support economic recovery, and improve access to affordable credit. Lower rates could also help banks manage rising non-performing loans, which have begun to decline in key sectors like trade, real estate, and manufacturing.
KCB’s decision to lower its rates aligns with this objective, signalling a potential trend among other lenders to follow suit. The development arrives as private sector credit hit a 22-year low in December 2024, a contraction blamed on costly loans.
