Kenyan borrowers are set to breathe easier as the country’s commercial banks prepare to offer more affordable loans starting December 2024, responding to recent economic challenges and central bank guidance.
The Kenya Bankers Association (KBA) has announced a strategic initiative to reduce lending rates, aligning with the Central Bank of Kenya’s (CBK) recent decision to cut the Central Bank Rate from 12% to 11.25% in December 2024.
We recognize the challenges individuals and businesses face arising from the prevailing high cost of loans, and the role that the Central Bank of Kenya plays in guiding the market on credit pricing.
— Kenya Bankers Association (KBA) (@KenyaBankers) December 8, 2024
The recent successive cuts in the Central Bank Rate, have implications on both… pic.twitter.com/8n7ExKoPDo
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Leadership’s Commitment to Financial Relief
John Gachora, KBA chairman and NCBA Group Managing Director, highlighted the critical nature of this move. In a statement, he emphasized the banks’ recognition of economic pressures:
“We recognise the challenges individuals and businesses face arising from the prevailing high cost of loans and the recent successive cuts in the Central Bank Rate (CBR). We, therefore, take steps to lower interest rates and make borrowing more affordable.”
Gachora explained that the rate reduction would not be a one-size-fits-all approach. Each commercial bank will be required to:
- Assess individual customer risk profiles
- Price credit based on approved base rates
- Evaluate specific risk premiums
“The reduction in loan interest rates will continue progressively in line with the evolution of monetary and credit risk factors,” he added.
Broader Economic Strategy
The KBA’s approach extends beyond simple rate cuts. The association plans to:
- Work closely with government stakeholders
- Review risk-based pricing models
- Address delayed business payments
- Resolve litigation backlogs
What This Means for Kenyans
The initiative promises more accessible financial resources for individuals and businesses, providing much-needed economic relief during challenging times.
