Equity Bank, which holds the title of the largest lender in Kenya based on customer numbers, has declared a significant decrease in interest rates. This move makes it the third major bank to implement such a change this week.
The bank announced a reduction of 3.00 percent on all its credit facilities denominated in Kenya Shilling, the largest cut among its competitors.
The bank’s updated lending rates will include an Equity Bank Reference Rate of 14.39 percent, revised, and a margin that depends on the risk profiles of individual customers.
New loans will have the new rates applied starting February 13, 2025, while existing loans will have the new rates applied starting March 1.
The decision reflects the recent major rate cuts by KCB Group, the largest bank by assets, which has lowered its base lending rate from 15.6% to 14.6% effective February 10, and Co-operative Bank, a tier one lender, which has reduced its rate from 16.5% to 14.5%.
Equity Bank believes that following this most recent adjustment, it is now poised to provide the market’s cheapest loans. This move mirrors a rising trend among Kenyan banks to reduce borrowing costs in light of persistent economic pressures.
Absa Bank also lowered its risk-based pricing benchmark from 17.5% to 16.5% on Wednesday, with effect from March 12, 2025.
The recent modifications align with the Monetary Policy Committee (MPC) of the Central Bank of Kenya’s (CBK) choice to reduce the Central Bank Rate by 50 basis points, bringing it down to 10.75 percent.
The goal of this cut is to encourage the expansion of credit in light of difficult economic circumstances. The MPC reduced the Cash Reserve Ratio by 100 basis points to 3.25 percent, a move anticipated to improve liquidity in the banking sector.
Moses Nyabanda, the managing director of Equity Bank Kenya, stated that the reduction demonstrates the bank’s dedication to easing the financial burden on Kenyans.
The consequences of the rate reductions are considerable, as it is anticipated that reduced borrowing costs will spur economic activity by making credit more available to both households and businesses.
Officials in the government estimate that this could help create jobs and promote consumer spending, both of which are vital to economic recovery.
Other tier-one lenders are feeling increased pressure to take similar actions.
CBK has expressed worries regarding the gradual speed of rate cuts and has called on banks to guarantee that borrowers truly receive the advantages of its monetary policy.
Governor Kamau Thugge has emphasized the significance of additional rate reductions to foster economic growth.
In order to guarantee adherence by banks, the CBK has initiated on-site examinations of five key financial institutions and has issued warnings about fines for those that do not comply.
Under the revised Banking Act, penalties of as much as Sh20 million or three times the value of any undue benefits gained by a bank from non-compliance are now stipulated.
