The Kenya Commercial Bank (KCB) has announced an upward revision of its base lending rate to 15.6% per annum.
The revision is effective May 27, 2024 – an uptick from the previous rate of 14%.
For existing loan facilities, the new rate will come into play starting July 1, 2024.
The revision is not isolated, as it follows a trend seen across the banking sector, with other institutions like NCBA and Equity Bank also increasing their rates in recent months.
These adjustments are largely in response to the Central Bank Rate (CBR) hikes, aiming to balance the banks’ risk and profitability.
“We wish to advise you that the bank reviewed its Base Lending Rate for Kenya Shilling denominated facilities to a variable base rate or 15.6% per annum effective May 27, 2024 for new facilities and July 1, 2024 for existing facilities,” reads a notice.
What Does it Mean?
For prospective borrowers, this means that any new loans from KCB will incur the updated interest rate immediately.
However, there’s a silver lining for existing borrowers, who have been granted a grace period until July 1, 2024, before the new rates affect their repayments.
Also Read: Uganda Hikes Lending Rate by 25 Basis Points to 10.25
Despite the increase, KCB’s rate remains competitive, especially when compared to the soaring rates of its peers.
For instance, NCBA’s lending rate recently jumped to 17.5% from 16.5%, and Equity Bank’s rate climbed even higher to 18.2%.
KCB’s positioning could potentially attract borrowers looking for more favorable loan terms amidst the rising rates.
The upward trend in lending rates could signal a period of increased profitability for commercial banks, especially as higher rates apply to all borrowers, regardless of when they secured their loans.
This could lead to record profits by the end of the second quarter.
However, it’s not all about the banks’ bottom line.
High lending rates pose a challenge for high-risk borrowers, some of whom face rates as steep as 26% in monthly interest.
How Metropol Will Help Price Your Loan Better
This underscores the importance of creditworthiness and the need for consumers to manage their financial health prudently.
Metropol, a leading Credit Reference Bureau (CRB) in Kenya with a presence in both Kenya and Uganda has a Metro Score which ranges from 200 to 900.
Higher scores indicate better creditworthiness, while lower scores may suggest challenges in debt repayment.
For example, a score of 200 – which is poor, indicates a history of late or missed payments.
Metropol CRB provides user-friendly options for Kenyans to access their credit information, including their Credit Score and full credit profile.
With a USSD code *433# an individual can request their Credit Report or download the Crystobol App from the Google Play Store.
