Deputy President Kithure Kindiki has announced that banks in Kenya will reduce their base lending rates again in March 2025, continuing a trend that began in 2024. This follows the Central Bank of Kenya’s (CBK) recent move to cut its base lending rate for the fourth time this year, a decision aimed at encouraging lending to the private sector and stimulating economic activity.
In a consultative forum with Meru County leaders at his Karen residence, Kindiki revealed that banks such as Equity Bank, Cooperative Bank, and KCB have already lowered their interest rates by between 2 and 3 percent. He further emphasized that these rates are expected to decrease further next month. “These interest rates you have seen Equity Bank, Cooperative Bank, and KCB reducing by between 2 and 3 percent, next month they will go down again,” Kindiki said.
The Deputy President explained that the reduction in interest rates is a result of a shift in government borrowing habits. During the past few years, the Kenyan government had borrowed extensively from banks, limiting the amount of credit available for private sector businesses. However, Kindiki noted that the government is no longer borrowing from the banks at the same scale, which will push financial institutions to seek customers more actively. “Banks were not lending businesses money because the government was borrowing that money; now we are not borrowing that money, so the banks will be forced to come and look for customers to give credit the way it was during the first years of President Mwai Kibaki’s administration,” he stated.
This move is part of ongoing efforts to stimulate economic growth by enhancing credit access, particularly for businesses that have faced difficulties obtaining loans in recent years. With reduced interest rates and increased competition among banks for customers, there is hope that the private sector will experience more favorable lending conditions, leading to growth in entrepreneurship and economic activity.
As the Kenyan government continues to adjust its fiscal policy, these changes in lending rates are expected to have a significant impact on the economy, particularly for small and medium-sized enterprises (SMEs) that are vital to the country’s growth.
