Small lender Habib Bank AG Zurich is Kenya’s cheapest bank for borrowers seeking a Sh100,000 personal loan over a 12-month period while Sidian is the priciest, new data on the cost of credit shows.
Disclosures on a portal operated by the Kenya Bankers Association (KBA) show that Housing Finance Corporation, ABC Bank and Standard Chartered Bank are the other relatively cheap lenders while Guardian and Access Bank Kenya have the second and third costliest loans for the same facility.
The website reveals the total cost of credit including additional fees.
A borrower would repay Sh112,750 for a Sh100,000 loan taken from Habib Bank AG Zurich, which only charges an annual interest rate of 12.75 percent without any fees.
The cost of Sh12,750 therefore rep-resents pure interest. At Sidian, the same borrower would on average pay back Sh131,100, a difference of more than Sh18,000, with the lender imposing additional fees above its 16.22 percent annual interest rate.
A Sh100,000 loan at Sidian attracts interest of Sh16,220, bank charges of Sh12,400 and Sh2,480 as third party costs, making it the most expensive bank for the facility across the board with the total loan cost of Sh31,100.
The total cost of credit at the Middle East Bank is Sh23,980 despite the lender pricing its facility at the highest interest rate of 23.98 percent but not levying additional fees.
The total cost of credit website reveals the pricing of loans under the current risk-based pricing regime which is set for a revamp concluding at the end of February 2026.
The portal shows that lenders are charging the same for both secured and unsecured personal facilities. The analysis done on Thursday captures the cost of taking a one-year, Sh100,000 loan from the 33 banks offering personal loans.
KBA Head of Research Samuel Tiriongo said all banks will be ready to roll out the new pricing regime which is anchored on the Kenya Shilling Overnight Interbank Average (Kesonia) at the end of this month.
The total cost of credit portal is also set for a revamp to cover more facilities beyond the current listing of mortgages, personal unsecured and personal secured loans.
“By November 30, all banks should have their models ready and approved. The beauty is that this time, only the board is approving the framework. Once the board approves, each bank can proceed to implementation,” Dr Tiriongo said.
“All banks have to publish the average premiums for all products that they have within their books.” Banks are set to transition to the new pricing regime from December for new loans while applying the improved framework on old loans by the end of February 2026.
The new pricing regime is deemed more responsive to policy direction by the Central Bank of Kenya (CBK), with borrowing costs expected to fall when the apex bank cuts its benchmark and rise when the rate increases.
The CBK has piled pressure on commercial banks to lower interest rates through eight consecutive cuts to the benchmark rate, which now stands at 9.25 percent from a high of 13 percent in August 2024.
Private sector credit growth recovered modestly to an annual rate of five percent as of the end of September, a far cry from the double-digit historical expansion.
Average commercial banks’ lending rates declined to 15.1 percent in September from 15.2 percent in August but have remained relatively higher when contrasted to CBK rate cuts in the past 12 months.
“The committee (Monetary Policy Committee) concluded there was scope for a further easing of the monetary policy stance by reducing the CBR [central bank rate] by 25 basis points,” the CBK said on October 7.
“This will augment the previous policy actions aimed at stimulating lending by banks to the private sector and supporting economic activity, while ensuring inflationary expectations remain firmly anchored, and the exchange rate remains stable.”
Banks have previously cited a variety of factors for failing to cut interest rates to borrowers faster including locking in costly acquired deposits for long and the lack of an industry benchmark for pricing loans before Kesonia was set.
The CBK has responded to bankers, asking them to avoid excuses for failing to cut borrowing costs in tandem with the benchmark rate cuts.
“There should be no excuse by banks for whatever reason ... there have been quite a number of excuses. This time, there won’t be an excuse. Once we lower the (benchmark) rate, banks should also lower their rates,” CBK Governor Kamau Thugge said previously.
Banks have cited other challenges to the pricing of loans, including a previous lack of adequate capacity to develop sound risk-based frameworks.
The final cost of credit to borrowers is expected to be Kesonia plus a premium based on each customer’s risk problem, which has been dubbed K. The premium factors bank operating costs, including expected returns to shareholders.
