CBK sets stage for cheaper loans as benchmark borrowing rate is slashed to 8.5 per cent ▷ Kenya News

Central Bank of Kenya (CBK) has lowered its benchmark lending rate from 9% to 8.5%; a move it says will help spur economic growth.

The regulator's Monetary Policy Committee (MPC) led by Governor Patrick Njoroge on Monday, November 25, noted that the economy was performing below its potential thus informing the need to ease access to credit.

Lowering the rate is expected to see banks slash their lending rates which will, as a result, encourage uptake of loans.

The MPC noted that inflation expectations remained well anchored within the target range, and assessed that the economy was operating below its potential level. Furthermore, the Committee noted the ongoing tightening of fiscal policy and concluded there was room for accommodative monetary policy to support economic activity.

The MPC, therefore, decided to lower the Central Bank Rate (CBR) to 8.50% from 9.00%. The Committee will closely monitor the impact of this change in its policy stance. The MPC will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures as necessary," said Njoroge.

The move by MPC comes hardly a month after Parliament removed the cap that had limited the maximum rate lenders could levy on borrowers at 13%.

This paved way for President Uhuru Kenyatta's signing of Finance Bill 2019. The head of state had returned the bill to MPs with a proposed amendment that prescribed scraping off the interest cap.

Uhuru had complained that the cap had limited access to credit as banks were shying away from borrowers they termed as high risk.

This, he said, had dealt a blow to Small and Medium Enterprises (SMEs) who were left at the mercy of shylocks charging exorbitant rates.

"Most commercial banks adjusted their lending business models towards large corporates and the public sector and away from small-scale borrowers and individuals. As a result, credit to segments such as MSMEs, that are perceived as risky, declined after imposition of the controls.

Shylocks and other unregulated lenders have taken advantage of the effects of capping to lend to desperate citizens at exorbitant rates in a predatory manner compounding the already existing problem of lack of access to affordable credit facilities due to prohibitive costs,” the president said.

However, since the repeal of the cap, banks are yet to review their borrowing rates but stakeholders are optimistic that it is only a matter of time before lending rates go down.

Do you have a groundbreaking story you would like us to publish? Please reach us through [email protected] or WhatsApp: 0732482690. Contact Tuko.co.ke instantly.

I want women to start urinating like men-Njeri Muthaka | Tuko Talks | Tuko TV.

Subscribe to watch new videos