The Central Bank of Kenya (CBK) has rolled out a new framework for pricing loans, anchoring lending rates on the Kenya Shilling Overnight Interbank Average (KESONIA) in a bid to boost transparency and strengthen monetary policy transmission.
The revised Risk-Based Credit Pricing Model (RBCPM), which takes effect September 1, 2025, for new variable-rate loans, replaces the current overnight interbank rate with KESONIA — a renamed version that aligns with global benchmarks such as the UK’s SONIA and the US’s SOFR.
Under the model, the total lending rate will equal KESONIA + Premium (K), with the premium covering lending costs, shareholder returns, and the borrower’s risk profile. The total cost of credit will include fees such as origination, processing, and commitment charges.
Existing variable-rate loans will transition by February 28, 2026, giving banks six months to adjust systems, contracts, and pricing models. Fixed-rate and foreign currency loans remain unaffected.
To improve market discipline, lenders will be required to publish their weighted average lending rates, premiums, and charges on both their websites and the Total Cost of Credit (TCC) platform.
CBK Governor Kamau Thugge said the shift is part of broader reforms to align Kenya’s financial markets with international standards and pave the way for new products, including KESONIA-linked instruments and a domestic derivatives market.
KESONIA will be published daily by CBK and used as the reference rate for most variable-rate loans. If unavailable, the Central Bank Rate (CBR) will serve as the fallback benchmark.
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