Kenya’s Central Bank Seeks to Scrap Risk-Based Loan Pricing for Benchmark Rate

• Proposal would tie all lending to the Central Bank Rate as single reference point
• Commercial lenders favour a Kenya Base Rate linked to interbank funding costs

Nairobi, Kenya – The Central Bank of Kenya wants to replace the risk-based credit pricing model introduced in 2019 with the Central Bank Rate, arguing that widespread abuse of the existing framework has pushed up borrowing costs and shut out credit-worthy customers. A working paper released this week says the current system allows banks to levy “unrealistic lending prices,” with some institutions applying blanket rates to entire customer segments rather than individual risk profiles.