The Kenya Bankers Association (KBA) has thrown its weight behind the Central Bank of Kenya’s (CBK) newly introduced risk-based credit pricing model, describing it as a transformative step toward expanding access to credit and strengthening transparency in the banking sector.
In a statement issued on Wednesday, September 3, the Association lauded the framework, noting that it will enhance the ability of banks to support Kenya’s economic growth by facilitating easier access to loans for individuals and businesses. The bankers highlighted that the new pricing approach requires full disclosure of all components that make up loan interest rates, a move they said will empower borrowers with clear and comprehensive information before applying for credit.
The revised model, announced by the CBK on August 26, 2025, integrates borrowers’ credit histories into the pricing of loans. This means that repayment behavior will directly influence the interest rates applied, rewarding responsible borrowers with more favorable terms.
“The banking industry welcomes the revised loan pricing formula for variable-interest rates,” the KBA said. “This shift is expected to significantly expand access to credit for underserved groups, including MSMEs, youth, women-led businesses, and persons with disabilities.”
A central feature of the framework is the introduction of the Kenya Shilling Overnight Interbank Average (KESONIA) as the common base rate for all variable-interest loans. KESONIA reflects the overnight lending rate among banks, providing a market-driven benchmark that aligns Kenya with international best practice.
Under the new system, loan rates will consist of the KESONIA base rate plus a borrower-specific premium tied to individual risk profiles. The transition will take place gradually, with banks required to review and update their pricing models between September 1 and November 30, 2025.
The KBA also praised the CBK for its role in ensuring transparency, ethical banking practices, and customer-centric reforms. “The banking industry commits to fully support the implementation of the new framework, not only as a compliance requirement but as an enabler of our shared ambition to expand access to credit,” the statement read.
