New calculation format to ease lending rates

By O’Brien Kimani

Lending rates are expected to drop significantly from next month once a new computing format is released by the central bank.

Under the new system, lending rates would be linked to the Kenya Banks’ Reference Rate, which is based on averages of the monetary policy rate and the 91-day Treasury bill yield over six months.

Commercial banks will then be allowed to add a certain premium based on business costs plus their mark-up.

Lending rates in the country currently average 21 percent on average, while deposit rates average 10 percent drawing fury from the public and the government as well.

Many attempts have been made including capping lending rates but there has been no much success achieved in lowering interest rates.