Tough times for Kenyans as CBK raises loan interest rates
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Kenyan borrowers face a tough time in loan servicing as the Central Bank of Kenya (CBK) revises base lending rates to 13%
Kenyan borrowers face a tough time in loan servicing as the Central Bank of Kenya (CBK) revises base lending rates to 13%.
The CBK Monetary Policy Committee (MPC) raised the base lending rate by 50 basis points from 12.5% revised in December 2023 to 13%.
The all-time high rate was last experienced in 2012, during the late President Mwai Kibaki’s administration.
CBK governor Kamau Thugge said on Tuesday, January 6, that the move was aimed at lowering inflationary pressures and stabilising the shilling.
“The proposed action will ensure that inflationary expectations remain anchored while setting inflation on a firm downward path towards the 5% mid-point of the target range as well as addressing residual pressures on the exchange rate,” said Thugge.
Kenya National Bureau of Statistics (KNBS) revealed on Wednesday, January 31, that the inflation growth rate was the highest in four months.
The Consumer Price Index (CPI) rose from 6.6% in December 2023 to 6.9% in January 2024.
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Alternatively, the Kenya shilling continued to dwindle against the US dollar as the exchange rate crossed the KSh 160 mark in the same month under review.
CBK noted that commercial bank lending grew to 13.9% in December 2023, compared to 13.2% in November 2023.
“The number of loan applications remained resilient, reflecting sustained demand, particularly for working capital requirements,” the MPC said in the report.
The report further indicated that banks continued to make adequate provisions for the non-performing loans during the period.
Banks in Kenya are charging varying interest rates, ranging from 13.89% to as high as 25% per annum.
Kenya Insitute of Bankers (KIB) Chief Executive Officer (CEO) James Wanjagi explained that the move is significant in easing inflationary and Kenya shilling pressures but will strain borrowers’ budgets.
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