The Central Bank of Kenya (CBK) has published the revised Risk-Based Credit Pricing Model (RBCPM) for adoption by the banking sector. This follows a public and stakeholder consultation period published by the CBK on 23 April 2025 on the new pricing model.

Under the new model, the lending rate will be comprised of the Kenya Shilling Overnight Interbank Average (KESONIA) plus a premium (“K”), where:

• KESONIA is the overnight interbank average rate charged by banks on unsecured overnight interbank lending and borrowing in Kenyan Shillings; and
• the premium (“K”) reflects a bank’s operating costs, return to shareholders and a borrower’s risk profile.

The new model applies only to variable rate loans denominated in Kenyan Shillings. It does not apply to foreign denominated currency loans and fixed rate loans. In cases where KESONIA is not available, the Central Bank Rate (CBR) may be used as a fallback reference rate.

Banks are required to implement the revised model for new loans effective 1 September 2025, with all existing loans required to be transitioned by 28 February 2026. Banks are required to disclose the full breakdown of their lending rates including the weighted average premium (“K”), fees and charges on their websites as well as on the Total Cost of Credit (TCC) portal.

Written by Dominic Indokhomi, Partner and Nathaniel Nduta, Associate, Bowmans Kenya