Kenya Introduces Transparent Credit Pricing Framework Effective September 2025
This new model aims to increase transparency in lending and promote responsible credit practices by tying loan pricing to a borrower's specific risk profile.
The Central Bank of Kenya (CBK) has issued a revised Risk-Based Credit Pricing Model (RBCPM) for the country’s banking sector, following a consultation period that began in April 2025. This new model aims to increase transparency in lending and promote responsible credit practices by tying loan pricing to a borrower’s specific risk profile.
A key component of the new framework is the adoption of the Kenya Shilling Overnight Interbank Average (KESONIA) as the new reference rate. KESONIA is a formal renaming of the existing overnight interbank average rate, aligning it with international standards like the UK’s SONIA and the US’s SOFR. Under the new model, the total lending rate will be calculated as KESONIA + Premium (“K”), with the premium covering the bank’s operational costs, return to shareholders, and the borrower’s risk profile. The total cost of credit will also include additional fees and charges.
The revised RBCPM will be effective for all new variable rate loans starting September 1, 2025. Existing variable rate loans will transition to the new model by February 28, 2026. To ensure transparency, all banks are now required to publish their weighted average lending rates, premiums, and fees for each of their loan products on their websites and on the official Total Cost of Credit website. The Central Bank of Kenya will also publish the KESONIA rate daily on its website.
