KCB Bank has become the first financial institution in Kenya to lower its base lending rate, adjusting it from 14.6% to 13.85% per annum, following the Central Bank of Kenya’s (CBK) recent policy shift aimed at easing borrowing costs and stimulating the economy.
In a statement issued on April 11, 2025, KCB announced that the new rate will apply to new loans starting immediately, while existing borrowers will see changes from May 11, 2025.
“This move is intended to provide more affordable credit and stimulate economic activity across the country,” the bank stated.
The revised base rate will affect only loans denominated in Kenyan shillings, and the final cost for individual borrowers will still vary based on KCB’s Risk-Based Credit Pricing Model, which considers each customer’s credit risk profile.
CBK Eases Monetary Policy Amid Improving Indicators
The decision by KCB comes just days after the CBK’s Monetary Policy Committee (MPC) lowered the Central Bank Rate (CBR) by 75 basis points to 10.00%, citing improving macroeconomic indicators and a stable inflation outlook.
“Overall inflation is expected to remain below the midpoint of the 5 ± 2.5% target range in the near term,” the MPC noted.
In support of its easing policy stance, the CBK also:
- Narrowed the interest rate corridor around the CBR from 150 to 75 basis points.
- Aligned the Discount Window rate to the new upper limit of the corridor — now 75 bps above the CBR.
These technical changes are aimed at enhancing the stability of interbank lending rates and improving monetary policy transmission to commercial banks and borrowers.
Lending Rates and Credit Uptake in Focus
According to CBK data, average lending rates in Kenya had already declined from 17.2% in November 2024 to 15.8% in March 2025. However, private sector credit uptake has remained weak, with only a 0.2% increase in March following a contraction in February.
KCB’s move is expected to pressure other commercial banks to follow suit, increasing competition in the credit market and widening access to cheaper loans for households and businesses alike.
