NAIROBI, Kenya- Kenyan banks have shown strong support for the Central Bank of Kenya’s (CBK) recent call to reduce lending rates to fuel private sector lending and investment.
Following a closed-door meeting last month with banking industry leaders, lenders have been adjusting rates, responding to CBK’s October reduction of the Central Bank Rate (CBR) from 12.75pc to 12pc.
This marks the second rate cut in a row as Kenya’s inflation rate eases and economic conditions stabilize.
CBK’s report, Commercial Banks’ Weighted Average Lending Rates for September, highlights significant disparities in interest rates across Kenyan banks.
For example, Tier 1 lenders like Cooperative Bank and DTB offer some of the lowest rates at 14.88pc and 12.44pc annually, respectively—both below the industry average of 15.6pc.
Meanwhile, top lenders such as KCB and Equity Bank have adjusted their rates to around 16pc, still above the average. Absa Bank remains the priciest Tier 1 bank with a lending rate of 20.02pc, closely followed by NCBA at 19.22pc.
At the opposite end of the spectrum, smaller banks like Premier Bank and Access Bank are leading the affordability race, with rates as low as 9pc and 11.42pc, respectively.
On the other hand, Middle East Bank tops the scale as the most expensive lender, charging an annual rate of 21.52pc.
The inflation rate in Kenya has shown significant signs of cooling, dropping below 3pc—an encouraging trend for both the banking industry and borrowers.
Data from the Kenya National Bureau of Statistics (KNBS) indicates a 2.7pc year-on-year increase in the general price level as of October 2024, with food and non-alcoholic beverage prices rising by 4.3pc. Housing, water, and electricity costs saw a modest 0.4pc hike.
Financial analysts, including Rufas Kamau of EGM Securities, anticipate that the CBK’s Monetary Policy Committee will likely keep the CBR at 12pc in its upcoming review, thanks to a stabilizing currency and reduced inflation pressure.
Kamau noted, “The local currency has also stabilized against major international currencies, with the latest quarterly data from the Capital Markets Authority showing a 23pc year-on-year gain.”
Kenya’s recent monetary easing mirrors moves by global heavyweights like the United States and the United Kingdom. At its September 2024 meeting, the U.S. Federal Reserve reduced rates by 50 basis points, the first cut in four years, bringing its interest rate target to 4.75-5pc.
Likewise, the Bank of England trimmed its rate to 5pc, marking its first reduction since the start of the pandemic in March 2020.
These moves signal a global trend towards easing monetary policy as nations look to alleviate the cost of living and boost economic activity.
As Kenya’s banking sector adjusts to CBK’s lowered CBR, borrowers can expect varying impacts depending on their chosen lender.
