Kenyan banks hike lending rates as inflation stays above target for nearly a year
Borrowing in Kenya has become more expensive as banks raise their lending rates. In the first three months of 2023, 27 out of 39 commercial banks increased their charges. This comes as inflation remains stubbornly high, staying above the government's 7.5% target for nearly a year.
The Central Bank of Kenya (CBK) set the tone in March by lifting its benchmark rate to 9.5%. Since then, banks have adjusted their own rates, widening the gap between the cheapest and most expensive lenders. The lowest rate now sits at 9%, offered by First Community Bank, while Credit Bank charges the highest at 17.6%.
Among the top 10 priciest institutions, borrowing costs range from 13.7% to 17.6%. Meanwhile, the 10 cheapest banks offer loans between 9% and 12.3%. Equity Bank stands out with a risk-based model, meaning its customers face rates anywhere from 12.5% to 21.02%.
Inflation has eased slightly, dropping from 9.2% in March to 7.9% in April. Yet it remains above the official ceiling for the 11th month in a row. Analysts note that major banks still hold strong pricing power, letting them keep rates high despite the slight cooling in price pressures.
The rising cost of loans adds pressure on households and businesses already facing high living costs. With most banks pushing rates upward, borrowers now face a wider spread of optionsāand costsādepending on where they turn for credit. The trend reflects both the CBK's tighter monetary policy and the banks' ability to pass those changes on to customers.
