Equity Bank has become the first bank in Kenya to adjust its lending rate to all its clients in Kenya.
In a notice to customers, Equity Bank said it is raising the rates from 17.56% to 18.24%.
The final interest rate shall be the base rate plus a margin of 8.5% to apply to all new Kenya Shilling credit facilities.
“Equity Bank wishes to notify its customers and the general public that the Bank Shall adjust the Equity Bank’s Reference Rate (EBRR) from the current 17.565 to 18.24%. Consequently, the final interest shall be 18.24% plus a margin-currently at maximum of 8.5% per annum,” said the notice in part.
Why Equity Has Revised Cost of Loan
The rate adjustments coincide with the benchmark lending rate which was pushed to a record 13%.
In its Monetary Policy Committee (MPC), the Central Bank of Kenya (CBK) defended the adjustment saying was meant to tame rising inflation.
Also Read: Kenya Raises Benchmark Lending Rate to 12-Year High
This adjustment in the CBR follows an earlier one in December 2023 when the CBK raised the key lending rate from 10.5% to 12.5%.
The CBK defended its February CBR hike on the basis that overall inflation had remained sticky in the upper bound of the target range.
MPC defended its move due to key components of inflation— including fuel, food, and other non-fuel non-food items which it said experienced increased prices in January.
CBK said its unexpected increase in the key lending rate was aimed at preventing US Dollar hoarding.
At the time, the shilling value was uncontrollably tanking against the greenback.
This trend has since reversed with the local unit gains and holders of the greenback dump them.
Equity Bank’s decision shall apply to all new Kenya Shilling denominated loans.
“We shall continue to assess the market and advise accordingly in case further changes.”
What Equity Bank Move Means to Customers
This is expected to hurt access to loans for individuals and companies, with borrowers set to feel the financial pain of costly loans.
