Private sector loans growth hits 6.3pc in November as interest rates decline

The last time the pace of growth exceeded this level was in April last year, at 6.6 percent.

The acceleration in the pace of lending to the private sector has come on the back of CBK’s Monetary Policy Committee (MPC) cutting the benchmark lending rate in nine consecutive sessions including the one yesterday where it slashed the rate to nine percent, from 9.25 percent.

At nine percent, the Central Bank Rate (CBR) —a key signal in the pricing of loans— is at the lowest level in about three years, having stood at 8.75 percent in January 2023.

The latest pace of credit growth marks a contrast from a negative growth of 2.9 percent in January. CBK attributed the growth to the falling interest rates.

The average commercial banks’ lending rates declined to 14.9 percent in November 2025 from 15 percent in October and 17.2 percent in November last year.

“Growth in credit to key sectors of the economy, particularly manufacturing, building and construction, trade and consumer durables, remained strong in November. This mainly reflects improved demand for credit in line with the declining lending interest rates,” said Kamau Thugge, the CBK governor, in the MPC statement.

The CBR had hit a 12-year of 13 percent in February last year where it lasted up to August of the same year before the CBK started cutting it as inflation eased and the Kenya shilling Tuesday's cut marked the ninth consecutive easing since the peak of 13 percent and means the CBR has seen a four-percentage points reduction over the past 15 months.

“This (reduction in CBR) 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,” said Dr Thugge.

Read: Banks urge ninth straight cut in benchmark cost of loans

Kenya’s headline inflation was 4.5 percent in November compared with 4.6 percent in October while the shilling has remained largely stable, exchanging at under 130 to the dollar.

This environment has given CBK room to cut CBR. The reduction in CBR is in line with the bankers’ wishes. Through Kenya Bankers Association (KBA), lenders had urged for a reduction in CBR to help lift the pace of private sector credit growth and reduce loan defaults.

CBK data shows the ratio of gross non-performing loans (NPLs) to gross loans was 16.5 percent in November 2025, down from 16.7 percent in October and 17.6 percent in August.

“Decreases in NPLs were noted in the mining and quarrying, energy and water, personal/household and transport and communication sectors. Banks have continued to make adequate provisions for the NPLs,” said CBK.

The banking industry is transitioning to use of the CBR as their benchmark in setting loan prices despite earlier rejecting it and negotiating the creation of the Kenya Shilling Overnight Interbank Average (Kesonia) which they have now shelved.

Banks including KCB, Equity, Absa, NCBA and DTB have issued notices that they will be using CBR as their reference rate in the risk-based pricing model which took effect on December 1.

Banks were expected to use Kesonia –which is based on the price at which banks borrow from each other referred to as interbank rate– as they are the ones who had pushed for its creation after they rejected the Central Bank of Kenya proposal to use the CBR as a benchmark for loan pricing.

The MPC noted that the revised model, which will be fully operational by March next year, will improve the transmission of monetary policy decisions to commercial banks’ lending interest rates and enhance transparency in the pricing of loans by banks.

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