President William Ruto has renewed pressure on commercial banks to lower their lending rates, arguing that credit remains too expensive for ordinary Kenyans and businesses despite recent cuts to the benchmark central bank rate.
Speaking at an event marking the Central Bank of Kenya’s 60th anniversary in Nairobi, Ruto said the gap between the policy rate and what banks actually charge borrowers remained too wide. “The central bank rate now stands at 8.75 per cent. The lending rates have declined. But at 14.39 per cent in July, credit remains expensive for many Kenyans and their businesses,” he said.
According to figures cited at the event, commercial lending rates have ranged between 10.59 per cent and 19.06 per cent, with some smaller lenders charging as much as 17 per cent, even as the Central Bank Rate has come down in recent policy reviews. The disparity has fuelled criticism that banks are slow to pass on the benefits of a lower policy rate to borrowers.
The President argued that banks should be doing more to channel Kenyan savings into productive economic activity rather than simply building balance sheets. “Kenya does not need strong banks merely for the sake of having strong banks,” he said, pressing lenders to expand access to affordable credit for small businesses and individual borrowers who have long complained of being locked out of reasonably priced loans.
The remarks come against a backdrop of a strengthening shilling and improved foreign exchange reserves, factors the government has pointed to as evidence of broader macroeconomic stability that should, in its view, give banks room to ease lending terms. Analysts, however, note that banks often cite credit risk, non-performing loans and the cost of mobilising deposits as reasons for maintaining higher rates regardless of central bank rate movements.
The call adds to a long-running back-and-forth between the government and the banking sector over the cost of credit, a persistent sore point for small and medium enterprises that make up the bulk of Kenya’s private sector employment. It remains to be seen whether lenders will respond with fresh rate cuts in the coming weeks.