CBK raises base lending rate; the highest since 2012
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Kenyans to pay more for loans as CBK (Central Bank of Kenya) raises base lending rate to 12.5%
Kenyans to pay more for loans as CBK (Central Bank of Kenya) raises base lending rate to 12.5%.
After raising the benchmark lending rate to 12.5%, the Central Bank of Kenya (CBK) dealt a severe blow to borrowers in the country.
The increase represents a change of 2 percentage points from 10.5%.
Exchange rate depreciation, according to CBK, is to blame for driving up domestic prices and the cost of servicing public sector external debt.
Due to the upward revision, obtaining cheaper and more affordable credit has become more difficult as households continue to struggle with the high cost of living.
This increase pushes the base lending rate to levels last witnessed in the early 1990s and is the highest increase in five years, as the country strives to tame high inflation that closed November at 6.8 per cent.
“This will ensure that inflationary expectations remain anchored while setting inflation on a firm downward path towards the 5.0 percent mid-point of the target range,” CBK said.
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Interest rates in Kenya averaged 12.98 per cent from 1991, reaching an all-time high of 84.67 per cent in July 1993 and a record low of 0.83 per cent in September of 2003.
This is likely to see bank rates for some customers hit a high of 28 percent courtesy of risk loan pricing exercised by almost all top banks in the country.
The average cost of loans based on the bank’s online portal that discloses lending charges currently stands at 19.1 per cent, with some borrowers shouldering effective repayment rates of up to 26.5 per cent on a reducing balance basis.
The higher cost of loans risks locking out businesses from accessing the credit they need for expansion and in turn, limiting their ability to create more jobs.
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