Equity Bank Kenya has cut its interest rate to below 26 percent, offering relief to borrowers ahead of the Central Bank of Kenya (CBK) meeting with banks over the delayed transmission of reduced benchmark rates to borrowers.
The lender said Monday it has cut its base rate, called the Equity Bank reference rate (EBRR), to 17.39 percent from 17.83 percent, meaning that it will price its loans up to a maximum of 25.89 percent after factoring in a margin of 8.5 percent.
The latest maximum rate is a decline from 26.33 percent has been in place since September and comes over a month since CBK’s Monetary Policy Committee (MPC) cut the Central Bank Rate (CBR) to 12 percent from 12.75 percent on October 8.
“With this reduction, all new and existing customers with Kenya shilling-denominated loans will benefit from lower borrowing costs, providing immediate relief and supporting their financial aspirations. Equity Bank remains committed to broadening access to affordable credit, thereby empowering small businesses, entrepreneurs, and individuals to participate in Kenya’s growth journey,” said James Mwangi, CEO at Equity Group.
Equity becomes the first lender to publicly announce a cut in its loans following the October CBR reduction and comes ahead of the planned meeting between CBK and bank CEOs this week.
The regulator is concerned that banks have been quick to cut deposit rates but slow to lower lending rates in line with CBR, delaying relief to borrowers.
Equity’s latest decision marks the second time this year that the lender is cutting rates in line with reducing CBR.
Before September, Equity’s EBRR was 18.24, pricing loans at a maximum of 26.74 percent.
This means that Equity has reduced rates by 0.89 percentage points across the two rounds of reductions on the back of CBK cutting its Central Bank Rate by one percentage point to 12 percent from 13 percent.
CBK first cut the CBR by 0.25 percentage points in August, followed by a 0.75 percentage point reduction in October. The regulators’ Monetary Policy Committee, which adjusts the rate, is set to meet on December 5, its last meeting this year.
Banks have dragged their feet in cutting interest rates to customers as opposed to the reverse when they have been quick to announce upward revisions of rates when CBR was rising.
CBK’s move to cut loan rates amid stable exchange rates and cooled inflation has mirrored what is happening in other jurisdictions.
The European Central Bank, for example, lowered its deposit facility rate by 0.25 percentage points to 3.5 percent while the US Federal Reserve Bank in November implemented its first rate cut since March 2020, reducing the target range for the Fed funds rate by half a percent to between 4.75 percent and five percent.
The Bank of England also cut rates by 0.25 percentage points in August and maintained the bank rate at five percent during its September meeting, with ongoing deliberations over further cuts.
