(Nairobi) – Equity Bank Kenya has announced a reduction in its interest rates, signaling relief for borrowers and reaffirming the lender’s commitment to improving access to affordable credit in the country. The bank’s new reference rate, known as the Equity Bank Reference Rate (EBRR), has been lowered from 17.83% to 17.39%. This change means the bank’s loans will now carry a maximum interest rate of 25.89%, taking into account a margin of 8.5%. This move comes in the wake of the Central Bank of Kenya (CBK) cutting the Central Bank Rate (CBR) to 12% from 12.75% on October 8.
The reduction marks a significant decrease from the 26.33% interest rate that had been in effect since September. It is the second time this year that Equity Bank has adjusted its rates in response to the changes in the CBR, following a series of cuts by the CBK earlier in the year. In fact, the latest reduction comes more than a month after CBK’s October policy adjustment.
Equity Bank CEO James Mwangi stated that this new rate cut will benefit both new and existing customers with Kenya shilling-denominated loans. It will lower their borrowing costs and help support their financial aspirations. He also emphasized that the bank remains committed to improving access to credit, especially for small businesses and entrepreneurs who play a crucial role in the country’s growth. The bank’s decision to reduce its interest rates is seen as part of a wider effort to increase financial inclusion and stimulate economic activity.
This move by Equity Bank is the first by any lender to publicly announce a loan interest reduction following the October CBR cut. The timing of this announcement is significant, as it precedes a scheduled meeting between the CBK and the country’s bank CEOs later this week. The CBK has expressed concerns about the slow pace at which banks are passing on the benefits of lower CBR to borrowers. While banks have been quick to reduce deposit rates, they have been much slower to adjust lending rates, delaying the relief that borrowers had expected.
Before the recent adjustments, Equity Bank’s reference rate stood at 18.24%, which led to loan rates as high as 26.74%. With this latest reduction, Equity Bank has cut its rates by a total of 0.89 percentage points since the beginning of the year. This rate cut follows a broader trend initiated by the Central Bank of Kenya, which had reduced the CBR by one percentage point, from 13% to 12%, in the months of August and October.
Banks in Kenya have been criticized for their reluctance to pass on the benefits of rate cuts to borrowers. This has sparked discussions, especially as the Central Bank has acted quickly to lower borrowing costs, while local banks have been more reluctant to adjust their interest rates downward. CBK’s move to reduce loan rates aligns with similar actions by central banks in other regions, where global financial institutions have also begun to cut rates. For instance, the European Central Bank reduced its deposit facility rate to 3.5%, and the U.S. Federal Reserve lowered its rate range to between 4.75% and 5% in November. The Bank of England also implemented rate cuts in recent months.
The upcoming meeting of the CBK’s Monetary Policy Committee (MPC), set for December 5, is expected to further influence the direction of interest rates. This meeting will be the last of the year, and analysts are closely watching how it will shape the future of loan pricing in Kenya and the broader East African region.