Kenyan Banks Reference Rate Retained at 9.87 Percent

Kenyan Banks’ Reference Rate (KBRR) has been retained at 9.87 by the Central Bank of Kenya on Wednesday contrary to the speculative increase anticipated by many.

This move has left borrowers sighing with relief as that means there should be no increase in the cost of loans as it was in the better part of 2015, where banks increased interest rates to more than 20 percent.

The Central Bank of Kenya had set up a regulating policy of setting the minimum cost of loans two years ago. This initiative was meant to ensure uniformity as well as stability in the financial sector as to shield borrowers from being exploited by the lenders.

The Central Bank of Kenya also retained the Central Bank Rate (CBR) which was left at 11.5 percent as it was two years ago.

The Kenya Banks’ Reference Rate is usually reviewed after every six months. The Central Bank arrives at the rate by calculating the average Treasury bill rate for the initial two months and the Central Bank Rate (CBR).

According to Dr. Patrick Njoroge, who is the chairman of the committee that reviews the KBRR as well as the CBR, the decistion to retain the KBRR was arrived at as a way of ensuring market stability.

During the better part of last year, the Treasury Bill Rates rapidly rose to above 20 percent but tumbled back to 10 percent during the month of December.

The ailing Kenyan Shilling against the dollar largely contributed to the increase of the interest rates last year something that saw those who had taken loans from the banks paying through the nose.

During that time too the prices of food skyrocket beyond reach to some households in Kenya and the inflation rate also rose.

These, coupled with the heavy excise duty imposed by government to some commodities, weighed heavily on Kenyans.

Article by Juma Fred.