Co-operative Bank Slashes Interest on Loans with Immediate Effect

The Co-operative Bank has announced a reduction in lending rates, days after the Central Bank of Kenya reviewed its base lending rate.

In a statement on Monday, February 10, the bank announced a reduction in lending rates from 16.5 percent to 14.5 percent per annum (p.a).

“Co-op Bank Group is pleased to announce a significant 2% reduction in our Base Lending Rate from 16.5% р.а. to 14.5% p.a,” reads part of the statement.

Co-operative Bank announced that the changes are effective right away.

The rates will include a base rate, with an additional margin of 0% to 4% per year, depending on the customer’s credit profile.

“This reduction takes effect immediately. The effective lending rate will be the Base Lending Rate of 14.5% p.a. plus a margin of between 0% p.a. to 4% p.a. based on the individual customer’s credit profile,” the Bank said.

Co-operative Bank Give Reason for Reducing Rates

The Bank clarified that the reduction in lending rates aims to boost credit growth across critical sectors of the economy.

This includes focusing on Micro, Small, and Medium Enterprises (MSMEs), which play a vital role in driving and sustaining economic growth.

CBK Lowers Lending Rates

This comes few days after the Central Bank of Kenya (CBK) lowered its base lending rate by 50 basis points to 10.75 per cent down from 11.25 per cent, effectively cheapening interest charged on loans.

On February 5, the Monetary Policy Committee (MPC) chaired by CBK Governor Kamau Thugge, said the committee resolved to also lower the Cash Reserve Ratio (CRR) by 100 basis points to 3.25 per cent from 4.25 percent in order to further support the lowering of lending rates.

Also Read: Banks with Lowest and Highest Loan Rates, KRA Collections Hit Ksh1.2 Trillion & USAID Employees Sent Home

“With these measures, banks are expected to take the necessary steps to lower their lending rates further, to stimulate growth in credit to the private sector, and support economic activity,” Thugge said.

Besides, Dr. Thugge said CBK has begun on-site inspections to ensure banks implement the Risk-Based Credit Pricing Model (RBCPM) and lower interest rates accordingly.

“Under the recent Banking Act amendments, any bank failing to pass on the benefits of reduced funding costs to borrowers will be penalized,” he said.

Also Read: CBK Lowers Interest Rates on Loans Again, Puts Exploitative Banks on Notice

KBA Calls Before MPC Meeting

The Kenya Bankers Association (KBA) called for a further reduction in interest rates before the MPC meeting.

In research published on January 29, KBA revealed that lowering the Central Bank Rates (CBR) further would encourage more borrowing in the country.

KBA argued that such a move would help support economic growth, which has been stifled by various internal and external factors.

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