A new report from the Central Bank of Kenya (CBK) has revealed significant disparities in loan interest rates among leading banks.
The ‘Commercial Banks’ Weighted Average Lending Rates’ report for September indicates that Cooperative Bank and Diamond Trust Bank (DTB) present the most competitive rates among Tier One banks, with rates of 14.88% and 12.44%, respectively.
Equity Bank closely follows with a rate of 16.20%, while KCB imposes a rate of 16.02%.
In contrast, Premier Bank and Access Bank offer the most economical loans, with rates of 9% and 11.42%.
The highest interest rate is recorded by Middle East Bank at 21.52%, succeeded by HFC at 20.50% and Credit Bank at 20.25%.
This report emerges as the government and CBK advocate for lower borrowing costs to foster growth in private-sector lending.
On 8 October 2024, CBK reduced its Central Bank Rate (CBR) from 12.75% to 12%, marking the second consecutive reduction aimed at promoting lending.
Both CBK Governor Kamau Thugge and President William Ruto have called upon banks to decrease their lending rates to improve credit accessibility.
“I encourage banks to act quickly to reduce their rates. This will benefit consumers, investors, and banks by fostering economic growth and addressing the issue of rising non-performing loans,” Thugge said.
Despite the recent rate reductions, numerous banks, with the notable exceptions of Equity and NCBA, have been hesitant to modify their rates.
In September, Equity revealed a reduction in its reference rate from 18.24% to 17.83%, while NCBA lowered its rate from 17.50% to 16.91%.
The banks’ reluctance to decrease rates has resulted in a significant drop in lending to the private sector, with growth declining from 3.7% in July to a mere 1.3% in August.
This scenario has compelled small businesses to explore alternative funding options, as banks continue to exercise caution and prioritize established relationships with larger clients.
