KCB Bank Kenya has increased its base lending rate for loans denominated in Kenyan Shillings from 14.7% to 15.6% per annum. KCB borrowers will see the adjusted rate applied starting May 27th, 2024 for new loan facilities, and July 1st, 2024 for existing facilities.
“We wish to advise you that the bank has reviewed its base lending rate for Kenya Shillings denominated facilities to a variable base rate of 15.6% p.a effective 27th May 2024 for new facilities, and 1st July 2024 for existing facilities,” KCB stated.
This decision by KCB aligns with the tightening of monetary policy implemented by the Central Bank of Kenya (CBK) earlier this year. The CBK raised its benchmark interest rate to 13% in February 2024, aiming to combat inflation. KCB’s adjustment reflects this shift, potentially signaling a period of higher borrowing costs for Kenyans.
The decision by KCB mirrors recent trends in the Kenyan banking sector. Last month, NCBA Bank increased its lending rate for shilling-denominated loans from 16.5% to 17.5%. Similarly, in February, Equity Bank raised its lending rate from 17.5% to 18.2% in reaction to the higher Central Bank Rate (CBR).
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The base rate is the rate at which the central bank lends money to commercial banks. It serves as a benchmark that influences the overall cost of borrowing for consumers and businesses. The interest rate, often confused with the base rate, is the actual amount charged by a bank to a borrower for a loan. This rate can vary depending on the bank, the borrower’s creditworthiness, and the loan product itself.
While the base rate doesn’t directly translate to the interest rate you pay, adjustments to the base rate can influence the overall cost of borrowing for Kenyans. Currently, Premier Bank offers the lowest interest rate on personal loans with a repayment period of one to five years, at 9.0%. Ecobank and Access Bank follow closely behind with rates of 9.9% and 11.3% respectively.
Despite the potential challenges for borrowers, KCB’s loan portfolio continues to demonstrate impressive growth. The bank’s Q1 2024 figures show a 9.54% increase, with total customer loans reaching Sh 1.02 trillion compared to Sh 928.82 billion in Q1 2023.
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This upward trend has been consistent since 2019, with KCB experiencing growth exceeding 7% in every Q1 of the past few years. Notably, Q1 2020 saw an even more significant rise of 19.3%. Furthermore, KCB’s loan-to-deposit ratio has improved. In Q1 2024, the ratio stood at 67.78%, down from 77.62% in the same period last year.