Co-operative Bank of Kenya has become the first lender to reduce its lending rate in line with the central bank’s move last week to cut the benchmark lending rate and the Cash Reserve Ratio.
Co-operative Bank has announced a reduction of its benchmark lending rate from 16.5pc to 14.5pc after policymakers at the Central Bank of Kenya (CBK) on Wednesday last week reduced the benchmark lending rate to 10.75pc, the lowest in a year.
In addition, the policymakers further reduced the Cash Reserve Ratio from 4.25pc to 3.25pc to free up more cash held by commercial banks for lending the private sector to stimulate economic activity.
According to the bank, the new rate which is 2pc lower will be applicable to both existing and new customers.
“Co-op Bank Group is pleased to announce a significant 2% reduction in our Base Lending Rate from 16.5% per annum to 14.5pc per annum,” said Co-op Bank Group Managing Director Gideon Muriuki in a statement.
Coop Bank’s decision to reduce lending rates is intended to stimulate credit growth to key sectors of the economy notably the Micro Small and Medium sized Enterprises that are a critical engine to drive and sustain economic growth.
The reduction in lending rates comes at a time when households and businesses are grappling with the high cost of living. However, individual borrowers will be charged different lending rate based on their credit score as well as borrowing and repayment history.
“The effective lending rate will be the Base Lending Rate of 14.5pc p.a. plus a margin of between 0pc p.a. to 4pc p.a. based on the individual customer’s credit profile,” he added.
The reduction in the base lending rate by Co-operative Bank is expected to trigger similar moves by other commercial banks in coming days.
