Central Bank cuts key lending rate to boost credit access

The Central Bank of Kenya (CBK) Monday signalled commercial banks to cut their lending rates after the regulator lowered its benchmark lending rate for the first time since May 2018 and weeks after the removal of the legal caps on borrowing charges.

CBK’s Monetary Policy Committee, sitting for the first time since Kenya lifted a cap on commercial interest rates on November 7, cut the CBR rate to 8.50 percent from 9.0 percent, saying the economy was operating below its potential.

The lowering of the rate is expected to signal banks to cut lending rates to boost supply of credit and put money in hands of consumers to boost demand for goods and services in corporate Kenya.

CBK say credit to the private sector grew 6.6 percent in the year to October, compared to 7 percent in the 12 months to Septembers—which are both below the ideal growth level of between 12 and 15 percent.