(Nairobi) – Coop Bank and DTB have lowered their lending rates to become the most affordable Tier 1 commercial banks in the country in a positive response to the Central Bank of Kenya’s (CBK) efforts to ease credit costs. This move follows a call from CBK to spur private sector lending and investment.
A recent report from CBK, titled “Commercial Banks’ Weighted Average Lending Rates,” showed that Coop Bank and DTB now offer some of the lowest rates in the industry, with Coop Bank charging an average annual lending rate of 14.88%, while DTB’s stands at 12.44%. These rates are below the industry average of 15.6%, following the CBK’s reduction of the Central Bank Rate (CBR) to 12% on October 8 from 12.75%.
The recent reduction in the CBR was the second consecutive cut by the central bank, signaling its continued efforts to ease borrowing costs. Other major banks, including KCB and Equity, have also reduced their lending rates, with KCB now charging 16.02% and Equity at 16.20%. However, these rates are still above the industry average.
Meanwhile, banks such as National Bank, Family Bank, and Standard Chartered also reduced their rates, but still maintain higher charges, ranging from 16.5% to 18.24%. On the other hand, Absa Bank remains the most expensive among Tier 1 banks, with an average lending rate of 20.02%, followed by NCBA at 19.22%.
While the rates of Coop Bank and DTB are notably lower, the most affordable rates in the country are offered by smaller banks, including Premier Bank and Access Bank, which charge 9% and 11.42%, respectively. In contrast, Middle East Bank remains the most expensive, with a lending rate of 21.52%.
Analysts anticipate that the CBK’s Monetary Policy Committee (MPC) will likely keep the anchor rate at 12% in its year-end review, especially after Kenya’s inflation rate eased to below 3%. The Kenya National Bureau of Statistics (KNBS) reported that the inflation rate in October 2024 stood at 2.7%, driven by price increases in food, non-alcoholic beverages, and housing costs.
EGM Securities’ Rufas Kamau predicts that CBK will maintain the current lending rate as inflation continues to decrease. He noted that the stability of the local currency, which has gained 23% year-on-year against major international currencies, also supports this outlook.
Globally, other central banks, such as the US Federal Reserve and the Bank of England, have also lowered interest rates, reflecting a broader trend of easing monetary policy. The Federal Reserve reduced its interest rate by 50 basis points in September 2024, the first cut in four years, while the Bank of England also lowered its rate to 5% earlier this year.
The recent adjustments in Kenya’s lending rates are expected to have a significant impact on the cost of credit, making it more affordable for individuals and businesses to access loans and invest in the economy.