Equity Bank Kenya has announced interest rate reduction on all new and existing Kenya Shilling-denominated credit facilities. This adjustment comes into effect on February 13, 2025, for new loans and from March 1, 2025, for existing loans.
This marks the third time in six months that Equity Bank has lowered its lending rates, following reductions in September and November 2024. The latest decrease aligns with the Central Bank of Kenya’s recent monetary policy decisions, including a 50-basis point cut in the Central Bank Rate (CBR) to 10.75% and a 100-basis point reduction in the Cash Reserve Ratio (CRR) to 3.25%.
The revised interest rates will consist of an updated Equity Bank Reference Rate (EBRR) of 14.39%, plus a margin based on individual customer risk profiles. This 300-basis point (3%) reduction applies to a wide range of credit products, reflecting the bank’s commitment to supporting customers across diverse sectors.
Moses Nyabanda, Managing Director of Equity Bank Kenya, emphasized the institution’s dedication to alleviating financial pressures:
“We understand the financial pressures facing Kenyans today, and we’re committed to doing our part to ease that burden. This rate cut is about more than just lower interest rates; it’s about opening doors for Kenyans to invest in their businesses, support their families, and their livelihoods.”
The interest rate reduction is anticipated to have a positive impact on the Kenyan economy. By lowering the cost of borrowing, businesses can access more affordable credit, reducing operational costs and fostering growth and job creation. For households, decreased loan repayments will increase disposable income, potentially stimulating consumer spending.
The Central Bank of Kenya’s Monetary Policy Committee (MPC) noted that the reduction in the CRR is expected to release additional liquidity to banks, which should lower the cost of funds and lending rates, ultimately supporting the growth of credit to the private sector. Equity Bank’s rate adjustment aligns with these policy goals, allowing customers to benefit directly from the intended economic stimulus.
This strategic move by Equity Bank underscores its role in fostering financial inclusion and supporting economic development in Kenya. By passing on the benefits of reduced interest rates, the bank aims to create an environment where businesses can expand, employment opportunities increase, and communities thrive.
The banking sector’s response to the Central Bank’s policy changes is crucial in ensuring that the intended economic benefits reach the broader population. As banks adjust their lending rates, it is expected that more individuals and businesses will find it feasible to access credit, thereby contributing to overall economic growth.
The Central Bank of Kenya (CBK) announced plans to commence on-site inspections of commercial banks to ensure lending rates reflect recent CBK monetary policy adjustments. This move comes amid concerns that high interest rates are stifling credit demand and impeding economic growth.
The inspections are aimed at assessing compliance with CBK monetary policy stance. The central bank has been actively adjusting interest rates to stabilize inflation and the foreign exchange market, yet lending institutions have been slow to align their borrowing costs with these changes.
CBK’s Monetary Policy Committee (MPC) recently noted a significant slowdown in credit growth due to elevated lending rates. According to data from December, growth in local currency-denominated loans stood at just 2.1%, while foreign currency-denominated loans—comprising approximately 26% of total loans—contracted by 11.4%.
The CBK has maintained that lower interest rates are crucial for boosting private-sector lending, which in turn supports economic growth. However, the extent to which banks adjust their lending rates in response to policy changes remains a key factor in determining the effectiveness of these measures.
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