Kenya Launches KESONIA as Kenya’s New Interbank Rate Benchmark

The Central Bank of Kenya (CBK)  has introduced a significant reform in the money market with the launch of the Kenya Shilling Overnight Interbank Average (KESONIA), which officially came into effect on September 1, 2025. This marks a major milestone in efforts to enhance transparency, efficiency, and stability in the domestic financial system.

For years, Kenya’s interbank market has relied on overnight lending rates among commercial banks to gauge liquidity conditions. However, the absence of a formalized benchmark made it difficult for market participants and policymakers to have a clear, consistent measure of short-term borrowing costs. With KESONIA, CBK now provides a standardized reference rate for the overnight interbank market, aligning Kenya’s financial infrastructure with international best practices.

The bulletin reported that by September 11, 2025, the KESONIA stood at 9.45 percent, marginally lower than the 9.48 percent recorded a week earlier. The average number of interbank transactions also rose slightly to 21 deals per day, compared to 20 the previous week, while the average value traded held steady at KSh 11.4 billion. These indicators suggest that the new benchmark is being smoothly integrated into market operations without disrupting liquidity conditions.

According to CBK, the introduction of KESONIA is not just a technical adjustment but a policy tool aimed at improving the monetary policy transmission mechanism. By providing a reliable and transparent benchmark, the central bank can better monitor liquidity trends, while commercial banks gain clearer pricing signals for interbank borrowing and lending. This, in turn, supports greater predictability in interest rate movements across the wider economy, from government securities to private sector credit.

KESONIA is also expected to enhance investor confidence. Domestic and international investors often view benchmark rates as a barometer of financial market health. With a credible interbank reference rate in place, Kenya strengthens its position in the regional financial markets, making it easier to attract foreign capital flows and deepen domestic market activity.

The launch of KESONIA comes at a time when Kenya’s financial markets have shown resilience despite global headwinds. Liquidity conditions remained adequate during the review week, with commercial banks holding excess reserves of KSh 20.6 billion above the statutory cash reserve requirement. This environment has provided a stable foundation for the adoption of the new rate without triggering volatility.

Looking ahead, the success of KESONIA will depend on its acceptance by market participants and its consistency as a benchmark over time. Analysts note that if effectively managed, KESONIA could become the cornerstone of Kenya’s short-term money market, much like LIBOR (London Interbank Offered Rate) and SOFR (Secured Overnight Financing Rate) have served in international markets.

In summary, the introduction of KESONIA represents a critical evolution in Kenya’s monetary and financial landscape. By providing a clear, transparent, and standardized benchmark for interbank transactions, CBK is laying the groundwork for a more predictable interest rate environment, stronger investor confidence, and a modernized financial market framework that supports sustainable economic growth.