Equity Bank has announced plans to reduce its loan interest rates in response to the Central Bank of Kenya’s (CBK) recent cut in the benchmark rate.
On November 12, Equity Group CEO James Mwangi expressed support for CBK’s decision to lower interest rates and revealed that the bank would pass these benefits to its customers by reducing its loan rates within the next seven days.
Mwangi also emphasized that the government’s efforts to reduce local borrowing would encourage lenders to prioritize private borrowers over government loans, thus stimulating lending to individuals.
“We are excited about what CBK is doing by lowering its interest rates,” Mwangi said. “Previously, when Treasury bonds were offering 17% to 18%, they crowded out the private sector and the financial sector. With the lowered rates, we expect more funding to flow into the private sector, and we plan to reduce our rates further within the next week.”
Mwangi also called on the CBK to consider another reduction in the benchmark rate before the year ends to further boost borrowing. “We hope to see further reductions to stimulate credit uptake,” he said.
In October, the CBK’s Monetary Policy Committee (MPC) reduced the Central Bank Rate (CBR) from 12.75% to 12.00% in an effort to stimulate economic activity amidst declining inflation. This followed a reduction in August, when the CBR was lowered from 13% to 12.75%. The CBK’s aim is to support economic growth amid a revised growth forecast and falling inflation rates.
Equity Bank’s move follows in the footsteps of NCBA Bank, which was the first lender to respond to the CBR cut by reducing its interest rates.
Earlier this year, in September, Equity Bank lowered its reference rate from 18.24% to 17.83% to encourage credit uptake in a challenging economic climate.
Despite the CBK’s interest rate reductions, lending to the private sector has sharply declined, with credit growth falling from 3.7% in July to just 1.3% in August. This decline is mainly attributed to a rise in non-performing loans, which increased to 16.7% of gross loans in August, up from 16.3% the previous month.
