President William Ruto has urged commercial banks to reduce lending rates, saying the current average of 14.39 per cent remains too high for many Kenyans and businesses.
Speaking in Nairobi on Thursday, September 17, during the Central Bank of Kenya (CBK) 60th Anniversary celebrations, Ruto said borrowing costs had not fallen sufficiently despite the reduction of the Central Bank Rate (CBR), which currently stands at 8.75 per cent.
The President said improved economic stability should translate into cheaper credit and greater access to financing across the economy.
“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.
“The gains of stability must now reach the real economy through more affordable and accessible credit. Kenya does not need strong banks merely for the sake of having strong banks."
He said reducing the cost of borrowing would enable farmers, businesses and young entrepreneurs to secure affordable financing, expand their operations and create employment opportunities.
Ruto also challenged financial institutions to make better use of savings mobilised from Kenyans by directing the funds towards productive economic activities.
“Kenya does not need strong banks merely for the sake of having strong banks. Our financial institutions must become better at converting Kenyan savings into Kenyan production,” the President said.
His comments came roughly a month after the CBK released data showing differences in average lending rates among commercial banks, with borrowing costs ranging between 10.59 per cent and 19.06 per cent.
The regulator's data showed that some of the country's major banks had either maintained their lending rates or made modest reductions as they remained cautious about expanding credit to individuals and small and medium-sized enterprises.
Smaller lenders, meanwhile, continued to charge relatively higher rates, with some rates reaching 17 per cent. The higher costs have been associated with the increased risk involved in lending to certain categories of borrowers.
The CBK has continued implementing reforms aimed at improving how banks price credit and making borrowing more affordable.
However, CBK Governor Kamau Thugge has previously noted that external economic pressures have complicated efforts to push lending rates lower.
