{"id":79219,"date":"2025-05-01T08:57:01","date_gmt":"2025-05-01T08:57:01","guid":{"rendered":"https:\/\/www.kba.co.ke\/?p=79219"},"modified":"2025-05-30T05:08:13","modified_gmt":"2025-05-30T05:08:13","slug":"banking-industry-cautions-cbk-proposal-could-stifle-credit-growth-urges-market-driven-pricing","status":"publish","type":"post","link":"https:\/\/www.kba.co.ke\/site25\/banking-industry-cautions-cbk-proposal-could-stifle-credit-growth-urges-market-driven-pricing\/","title":{"rendered":"Banking Industry Cautions CBK Proposal Could Stifle Credit Growth, Urges Market-Driven Pricing"},"content":{"rendered":"\t\t
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Nairobi, May 1, 2025…<\/strong> The banking industry has cautioned that the Central Bank of Kenya\u2019s (CBK) proposed Risk-Based Credit Pricing Model risks stifling access to credit for vulnerable enterprises, describing it as a reintroduction of regulatory control over lending rates.<\/p>

In a statement, the banking industry umbrella body, Kenya Bankers Association (KBA), argued that CBK\u2019s proposal, which mandates the Central Bank Rate (CBR) as the base rate and subjects lending premiums (\u201cK\u201d) to regulatory approval, effectively amounts to interest rate capping. According to KBA, such controls would restrict credit access, particularly for small businesses, low-income households, and micro-enterprises, mirroring the adverse effects experienced between 2016 and 2019 under the previous interest rate caps.<\/p>

The industry warns that the proposed framework undermines its ability to deliver on its public commitment to extend KES 150 billion annually in new loans to Micro, Small, and Medium Enterprises (MSMEs) from 2025 to 2027, a pledge made last year.<\/p>

Instead, KBA argues for a market-based framework anchored on the interbank rate, a transparent benchmark aligned with global best practices used in jurisdictions such as the United States, United Kingdom, and European Union. This model, KBA says, would ensure effective monetary policy transmission, risk-sensitive credit pricing, and broader access to finance.<\/p>

The Association notes that a flexible and transparent model, where premiums reflect differentiated borrower risk, operational costs, and prevailing market conditions, is consistent with Kenya\u2019s liberalized interest rate regime. Disregarding the interbank market, it argues, weakens monetary policy effectiveness and misaligns market outcomes, with unintended consequences for credit availability.<\/p>

KBA reiterates its commitment to working constructively with CBK and all stakeholders to co-create sustainable credit pricing reforms that advance financial inclusion and support economic growth.<\/p>

Access Full Statement Here: KBA Position On The CBK Consultative Paper On Review Of The Risk-based Credit Pricing Model<\/span><\/a><\/strong><\/span><\/p>

Media Contacts <\/strong><\/p>

Christine Onyango<\/strong><\/p>

Director, Communications and Public Affairs\u00a0
Kenya Bankers Association
Email: conyango@kba.co.ke<\/a><\/p>

About Kenya Bankers Association <\/strong><\/p>

KBA (www.kba.co.ke) was founded on 16th July 1962. Today, KBA is the financial sector\u2019s leading advocacy group and banking industry umbrella body that represents total assets in excess of KES 7.7 trillion. KBA has evolved and broadened its function to include advocacy on behalf of the banking industry and championing financial sector development through strategic projects such as the launch of the industry\u2019s first P2P digital payments platform PesaLink. In line with the Government\u2019s policy on publicprivate partnerships, KBA and Central Bank of Kenya have implemented key projects such as modernization of the National Payments System through the Automated Clearing House, implementing the Real Time Gross Settlement System (RTGS), and the Kenya Credit Information Sharing Initiative. The KBA members are comprised of commercial banks and deposits taking microfinance banks.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t

<\/span><\/div>","protected":false},"excerpt":{"rendered":"

Nairobi, May 1, 2025… The banking industry has cautioned that the Central Bank of Kenya\u2019s (CBK) proposed Risk-Based Credit Pricing Model risks stifling access to credit for vulnerable enterprises, describing it as a reintroduction of regulatory control over lending rates.<\/p>\n

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