The Central Bank of Kenya (CBK) has issued new directives to commercial banks on lending rates.
In a statement dated June 9, 2026, CBK said that banks should continue lowering lending rates in line with the easing of monetary policy to support private-sector borrowing and economic growth.
The directive was announced after the Monetary Policy Committee (MPC) retained the Central Bank Rate (CBR) at 8.75 % but emphasized the need for commercial banks to ensure that borrowers continue to benefit from lower interest rates.
“Having considered these developments, including the potentially transitory nature of the conflict, the Committee concluded that the current monetary policy stance, with the Central Bank Rate unchanged at 8.75 percent, remains appropriate to ensure that inflation expectations remain anchored within the target range, and the exchange rate remains stable,” read the statement.
CBK Pushes for Lower Cost of Credit
CBK noted that lending rates have been gradually declining following previous reductions in the benchmark policy rate.
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According to the MPC, average commercial bank lending rates stood at 14.5% in May 2026, down from 14.7% in April 2026 and 17.2% in November 2024.
The committee attributed the improvement in private sector lending to the decline in borrowing costs, saying demand for credit has strengthened across key sectors of the economy.
Trade, agriculture, building and construction, and consumer durables were among the sectors that recorded strong growth in credit uptake.
CBK indicated that the continued reduction of lending rates remains important in ensuring businesses and households have access to affordable financing amid prevailing economic challenges.
Private Sector Lending Records Strong Recovery
The latest data from CBK shows that credit growth has recovered over the past year.
Private sector credit expanded by 9.3 % in May 2026, compared to 7.1 % in April 2026. This marks a substantial turnaround from January 2025, when lending growth had contracted by 2.9 %.
The MPC said the recovery reflects improved demand for loans and the impact of lower interest rates across the banking sector.
The committee also cited findings from recent CEO and Market Perceptions surveys, which showed continued optimism among businesses regarding economic prospects over the next 12 months.
Respondents pointed to expected favorable weather conditions, increased infrastructure investment, digital innovation, exchange rate stability, and improved access to credit as key drivers of growth.
However, businesses also raised concerns about inflationary pressures, the high cost of doing business, weak consumer demand, and uncertainty arising from global geopolitical tensions.
Also Read: Kenyans Face Higher Loan Costs as Bankers Push for CBK Rate Hike
Banking Sector Remains Stable
The MPC noted that Kenya’s banking sector remains stable and resilient despite the challenging global environment.
Banks continue to maintain strong liquidity and capital adequacy levels, while the ratio of gross non-performing loans (NPLs) has continued to decline.
The NPL ratio stood at 15.3% in May 2026, compared to 15.6% in February 2026 and 17.6% in August 2025.
According to the committee, reductions in bad loans were recorded in the personnel and household, transport and communications, and mining and quarrying sectors.
The central bank maintained the CBR at 8.75%, saying the current monetary policy stance remains appropriate for anchoring inflation expectations and maintaining exchange rate stability.
MPC added that it will continue to monitor developments in lending rates, inflation, global oil prices, and broader economic conditions and stands ready to take further action if necessary.
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