The Kenya Bankers Association has endorsed the Central Bank's revised risk-based credit pricing model, a new reference in determining the interest rates on loans issued by commercial banks.
In a statement on Wednesday, September 3, the Association said the change will facilitate greater access to bank credit for both individuals and businesses, further enhancing the banking sector's capacity to support Kenya's economic growth.
While acknowledging the significance of the new loan pricing model, the bankers noted that the framework would promote transparency by requiring banks to disclose all the components that make up interest rates.
According to the bankers, through transparency, borrowers would be able to have a clear and comprehensive understanding of loan interest rates before applying for credit.
They stated that the new model would further integrate a borrower’s credit history as a key pricing factor, making past repayment behaviour an important determinant of loan interest.
"The banking industry welcomes the revised loan pricing formula for variable-interest rates, announced by the Central Bank of Kenya (CBK) on August 26, 2025," the bankers stated.
"This shift is expected to significantly expand access to credit for previously underserved groups, including MSMEs, youth, persons with disabilities, and women-led enterprises," they added.
Of much significance, according to the bankers, was the introduction of the Kenya Shilling Overnight Interbank Average (KESONIA) as the common base rate for all variable-interest loans.
The Association affirmed that KESONIA, the market-determined rate based on the interest rate at which banks lend to each other on an overnight basis, aligns Kenya with global best practice.
Under this structure, the variable-interest rate offered to a customer will consist of the KESONIA base rate plus a premium that reflects their individual risk profile.
The transition is expected to be implemented over the next six months, from September 1 to November 30, 2025, with banks required to review and update their loan pricing models.
"Bankers recognise the important regulatory role CBK has played in guiding the sector to enhance transparency, strengthen customer centricity, ensure ethical banking practices, and roll out the revised risk-based pricing of credit," the Bankers Association wrote.
It went on to add, "The banking industry commits to fully support the implementation of the new framework, not only as a compliance requirement but also as an enabler of our collective ambition to expand access to credit for both individuals and businesses."
