For the second time now, The Monetary Policy Committee also known as the MPC revised the Central Bank Rate but retained the 9% CBR. This was done in a meeting that was held on the last week of September. Prior to the first reduction of the CBR, banks were charging hefty interests on loans in excess of 23%.
This has made it hard for Kenyans to repay loans due to the overburdening interests. However, the president saw the need to revise the interest rates so as to facilitate fairness in the financial sector. Ever since loans have been affordable and banks have diversified their approach to making more money.
MPC retains Central Bank Rate at 9%
Interestingly, the banks still make huge profits even after the reduction of the Central Bank Rate. At the moment, all commercial banks in Kenya are allowed to charge an interest rate of between 9% and 13 %. This is the recommended rate by the monetary policy Committee.
Following the reduction of the interest rates. Banks have become accommodative to almost all people in need of loans so as to increase their credit score. Prior to that, loans were mostly given to borrowers who were seeking huge loans into the million. Most average Kenyans felt discriminated against as they could not get basic loans to improve their lives. As such, the retention of the interest rate at 9% is a welcome move from the MPC. All Kenyans will continue to have access to bank loans at a fair rate.
Still, the standard rate has enabled small Saccos and cooperatives to be competitive with mainstream banks. During the Monetary Policy Committee, the central bank Governor, Patrick Njoroge stated that the MPC decided to retain the CBR at 9% after noticing that the rate had some positive economic factors including tolerance to inflation, and a decrease in NPL also known as non-performing loans.