NAIROBI, Kenya – Commercial banks are calling on the Central Bank of Kenya (CBK) to lower the base lending rate again, arguing that current economic conditions support a policy shift to ease borrowing costs and unlock credit growth in the private sector.
Through the Kenya Bankers Association (KBA), the lenders said subdued inflation, a stable exchange rate, and weak credit uptake provide sufficient room for further monetary easing.
“Overall inflation remains low, and inflation expectations in the short to medium term are anchored within the target range. The Kenyan shilling remains stable, supported by strong foreign exchange reserves, resilient remittances, and a manageable current account deficit,” KBA said in a research note. “In view of these developments, we opine that there is scope to cut the Central Bank Rate (CBR) to provide impetus for stronger private sector credit growth and anchor economic growth,” it added.
The appeal comes ahead of the Monetary Policy Committee (MPC) meeting slated for October 7, where the CBK will review the policy rate.
The committee has trimmed the CBR in each of its last seven sittings, most recently on August 12, when it dropped to 9.5 per cent from 9.75 per cent.
KBA believes that another reduction would make loans cheaper, boost business investment, and stimulate household spending.
Private sector credit expanded by 3.3 per cent in August, the fastest growth in six months, signaling a tentative recovery after months of contraction.
However, the central bank has in recent months accused commercial lenders of being slow to transmit lower policy rates to borrowers.
CBK Governor Kamau Thugge recently urged banks to “end excuses” and reduce lending rates in line with policy adjustments, noting that the market is moving toward a new loan pricing model designed to respond more quickly to changes in the CBR.
Despite the CBK’s pressure, banks remain wary of rising defaults. The industry’s non-performing loans (NPLs) stood at 17.6 per cent by June 2025, reflecting continued financial strain among households and businesses.
The high NPL ratio and a cautious lending environment contributed to a credit contraction earlier this year, when private sector lending shrank by 2.9 per cent in January and 1.3 per cent in February before showing signs of recovery in mid-year.
Analysts say the upcoming MPC decision will test CBK’s balancing act between stimulating growth and managing financial stability, as the regulator weighs pressure from banks against its caution over the quality of credit growth.
