In a move aimed at easing the financial burden on individuals and businesses, Kenya’s banks have agreed to reduce lending rates, signaling a commitment to spurring economic growth.
The Kenya Bankers Association (KBA) announced that, in response to successive cuts in the Central Bank Rate (CBR), banks will progressively lower their interest rates starting December 2024.
The reduction in loan interest rates is part of a broader effort to make borrowing more affordable as the country grapples with high living costs and slowed economic activity.
The decision comes as banks aim to balance the cost of deposits, which were locked in at higher rates before the CBK’s recent interest rate cuts, and the need to support customers facing financial strain.
KBA noted that the banking sector has transitioned to a risk-based pricing model, where each bank assesses its customers’ risk profiles when setting loan rates.
Factors such as the level of non-performing loans and challenges borrowers face in servicing their debt will influence the pricing.
However, the lower interest rates are expected to ease access to credit, helping to boost business activity and consumer spending, which have been hindered by high borrowing costs.
While the reduction in lending rates is a positive step, KBA acknowledged the ongoing challenges, including delayed payments to businesses and reduced disposable incomes, which have made it difficult for many borrowers to meet their financial obligations.
The association is working with the government and other stakeholders to address these issues and further enhance the lending environment.
KBA’s Chairman, John Gachora, who is also the Group Managing Director of NCBA, emphasized that the banking sector remains committed to supporting economic growth by providing more accessible, affordable credit.
The goal is to create a sustainable lending environment that can help individuals, businesses, and the economy as a whole thrive.
This move by Kenya’s banks is seen as a significant step in fostering a more favorable economic climate and supporting long-term growth.
