Kenya’s banking sector is witnessing more prospects, a more transparent and market-driven phase, supported by regulatory reforms. A major development in 2025 has been the rollout of the Kenya Shilling Overnight Interbank Average (KESONIA) as the new benchmark for pricing variable-rate loans.
KESONIA is part of the Central Bank of Kenya’s revised Risk-Based Credit Pricing Model, which requires banks to price loans using a reference rate plus a borrower-specific risk premium.
This approach improves transparency, strengthens the transmission of monetary policy into lending rates, and aligns Kenya’s banking system with global best practice.
It rewards strong credit profiles with lower pricing for borrowers, while for banks it encourages more disciplined risk assessment.
Kenya’s move mirrors trends elsewhere on the continent. South Africa has long relied on the Johannesburg Interbank Average Rate (JIBAR), introduced in 1999, as a benchmark for loan pricing and money-market transactions. Namibia adopted the Wibar framework in 2011, linking lending rates more directly to the central bank’s policy rate. These examples highlight a regional shift toward market-based benchmarks similar in intent to KESONIA.
As Kenyan banks transition their loan books to the KESONIA framework through early 2026, the sector is expected to become more responsive to market conditions.
Also Read: CBK’s New KESONIA Loan Pricing Model Explained in Simple Terms as it Takes Effect December
According to the CBK, Institutions that manage risk effectively and attract high-quality borrowers are likely to improve both competitiveness and profitability.
Recent Monetary Policy Committee decisions to lower the Central Bank Rate are already being reflected in lending rates.
Diamond Trust Bank Kenya has reduced its base lending rate from 14.21% to 13.77%, while Equity Bank and KCB Bank Kenya have aligned their variable-rate loans to the lower CBR of 9.0%, with customer-specific risk premiums. These adjustments signal a gradual move toward more affordable credit and a more dynamic lending environment.
- KCB Bank: Reduced its Base Lending Rate to 9.0%
- NCBA Bank Kenya: Lowered its Base Lending Rate to 15.34% per annum
- Absa Bank Kenya: Lowered its Base Lending Rate to 10.75% p.a., a 100 basis points cut.
- Co-operative Bank: Significantly reduced its Base Lending Rate by 2% to 14.5% p.a
Alongside these pricing reforms, the Central Bank of Kenya approved an additional 42 Digital Credit Providers on 30 December 2025, raising the total number of licensed digital lenders to 195.
This followed earlier approvals in June 2025 and September 2025. The expanded licensing reflects CBK’s efforts to grow the digital lending market while strengthening consumer protection and transparency.
