Kenya’s top-tier lenders are diverging sharply on how to price loans under the Central Bank’s revamped credit framework, revealing a split approach to a reform meant to standardise borrowing costs.
At the heart of the divide is the choice of benchmark. While the Central Bank of Kenya has promoted the Kenya Shilling Overnight Interbank Average, or KESONIA, as the preferred market-based reference rate, it has stopped short of enforcing its exclusive use. That regulatory ambiguity has given banks room to choose their own anchors.
Co-operative Bank has opted to fully embrace KESONIA, signalling a clean break from policy-led pricing. From late February 2026, all its existing variable-rate shilling loans will be pegged to KESONIA plus a customer-specific risk margin, with interest rates adjusting automatically in line with daily interbank liquidity conditions published by the CBK.
Other major lenders are taking a more cautious route. Equity Bank and Diamond Trust Bank have confirmed they will continue repricing existing variable-rate facilities using the Central Bank Rate, topped up with borrower-specific premiums. Under this approach, loan rates move only when the Monetary Policy Committee adjusts the CBR, rather than responding continuously to market liquidity.
KCB Bank has also aligned itself with the CBR. The lender adopted the revised risk-based pricing model for new variable-rate shilling loans from December 2025, using the policy rate as its reference. Existing facilities will transition in March 2026, applying the new model to outstanding balances without introducing additional fees for current customers.
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The CBK rolled out the revised Risk-Based Credit Pricing Model in August 2025, scrapping opaque, bank-specific base lending rates in favour of a common and transparent framework. KESONIA, derived from actual overnight interbank transactions, was positioned as the benchmark that would sharpen monetary policy transmission and limit discretion in loan repricing.
Although KESONIA and the CBR have broadly moved in tandem, their behaviour differs in practice. The CBR changes in deliberate policy steps, while KESONIA fluctuates with real-time liquidity in the banking system. For borrowers, that distinction determines how quickly interest rate shifts feed through to monthly repayments.
The result is a unified pricing framework in theory, but a fragmented reality in practice. As Kenya moves through 2026, borrowers will face markedly different interest-rate dynamics depending on whether their bank has chosen a market-linked or policy-linked path, adding a new layer of complexity to the cost of credit.
