Kenya’s Loan Pricing Set for a Big Shake-Up!

The Central Bank of Kenya (CBK) is working with commercial banks to revamp loan pricing models, aiming for a more standardized and responsive lending rate. This comes after concerns that banks haven’t lowered interest rates in line with the recent CBR (Central Bank Rate) cuts.

·??????? Banks argue that the current risk-based models are inflexible, making it hard to adjust rates promptly.

·??????? Industry leaders are pushing for a common base rate, similar to the Kenya Bankers Reference Rate (KBRR), which was phased out in 2016

·??????? The CBK is tightening oversight, warning banks of penalties if they fail to reflect CBR reductions in their lending rates

·??????? A new reference rate, similar to the SOFR (Secured Overnight Financing Rate) used for foreign currency loans, is under discussion

This move could make borrowing cheaper and more transparent for businesses and individuals. What do you think? Should banks be required to align rates with CBK directives?

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