This archive report was first published on 4 November 2021.
Published on November 4, 2021, the Central Bank of Kenya (CBK) data shows that the cost of credit has risen to a 17-month high, with banks charging an average of 12.12 per cent interest on loans in August.
This is the highest lending rate since February last year when borrowers paid banks an average of 12.19 per cent.
The rise in interest rates comes at a time when the economy is experiencing inflationary pressure as businesses reopen, following the lifting of the night-time curfew.
Johnson Nderi, manager in charge of corporate finance and advisory at ABC Capital, an investment bank, attributed the rise in interest rates to the fear of high inflation.
“Most guys are just protecting their downside,” said Mr Nderi, adding that the end of the interest rate capping regime has left banks with the flexibility of hitting small, risky borrowers with higher interest rates.
As long as you are lending to more SMEs, you are charging higher rates,” he said.
According to an analysis by the Kenya Bankers Association, banks charged an average of 13.07 per cent for a Sh1 million personal secured loan repayable in 12 months.
The government has introduced measures to ensure micro, small and medium enterprises (MSMEs) access credit, including a moratorium on listing at Credit Reference Bureaus (CRBs) for loans of less than Sh5 million.
President Uhuru directed relevant authorities to effect a moratorium on listing at CRBs for loans of less than Sh5 million, which will end in September next year.
