CBK’s KESONIA Based Loan Pricing Model Gets Bankers’ Nod
The Kenya Bankers Association (KBA) has endorsed the Central Bank of Kenya’s (CBK) updated risk-based credit pricing framework which will now be the benchmark for determining interest rates in commercial banks.
In a statement issued on Wednesday, September 3, KBA said the new structure will open up more access to bank loans for individuals and businesses and strengthen the financial sector’s role in driving Kenya’s economic growth.
The Association said the revised model will be more transparent as banks will be required to disclose every component that makes up the loan interest rate. This will give borrowers a clear picture of what they are signing up for before applying for credit.
Significantly, the framework will now tie loan costs to a customer’s credit history. Past repayment behaviour will be a key factor in how much interest an individual or business pays.
“The industry welcomes the revised loan pricing formula for variable interest rates announced by CBK on August 26, 2025,” KBA said.
They noted that the change will widen credit opportunities for marginalized groups such as micro, small and medium enterprises (MSMEs), women-led businesses, young entrepreneurs and persons with disabilities.
At the heart of the new model is the Kenya Shilling Overnight Interbank Average (KESONIA) which will be the common base rate for all variable interest loans. KESONIA is market driven and mirrors international best practice.
Under this structure, a borrower’s interest rate will be the KESONIA base rate plus an additional margin that reflects their individual risk profile.
Implementation will be phased over six months from September 1 to November 30, 2025 to give banks time to adjust their systems.
KBA commended CBK for its regulatory leadership saying the central bank had guided the industry towards more transparency, customer focus and ethical banking standards.
“The industry fully commits to this framework not just as a compliance requirement but as a driver of our shared goal to increase access to credit for both businesses and individuals,” KBA said.
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CBK’s KESONIA Based Loan Pricing Model Gets Bankers’ Nod