Easing lending rates sees Kenyan banks cut bad loans to 16.4%

Kenya’s overall inflation stood at 3.3 per cent in January 2025 compared to three per cent in December 2024 and remained below the midpoint of the target range of 5±2.5 per cent. Core inflation declined to 2.0 percent in January from 2.2 percent in December, reflecting muted demand pressures in the economy. The decline in core inflation was mainly on account of lower prices of processed food items, particularly sugar, maize and wheat products.

By Newsroom On Feb 7, 2025

By Eunice WAWUDA

Kenyan banks marginally cut non-performing loans to 16.4 per cent from 16.5 and 16.7 per cent in November and September 2024 respectively illustrating borrowers’ effort to honour loan obligations as the cost of living ease on stable currency and easing credit rates.

The lower NPL ratio is also attributed to easing lending rates with the apex bank on Wednesday further cutting the base rate by 50 basis points to 10.75 per cent.

According to CBK, the drop in CBR is expected to lower the average commercial lending rate in the coming months from the current 16.9 per cent, having dropped from 17.2 per cent in December last year.

CBK also reduced the Cash Reserve Ratio (CRR) by 100 basis points to 3.25 per cent from 4.25 per cent, to complement the lowering of the CBR, and support the lowering of lending rates to aid cash flow to the private sector.