The Kenya Bankers Association (KBA) is calling on the central bank Monetary Policy Committee (MPC) to keep interest rates unchained at 8.75pc during Wednesday review.
According to KBA, the maintaining the lending rates will help strengthen the credit market which is still fragile and as inflation rate remains within target.
During the first sitting of the year in February, MPC lowered the Central Bank Rate (CBR) by 25 basis points to 8.75 percent from 9pc in a move that aimed to stimulate lending to the private sector and support the economy.
Findings by KBA Centre for Research on Financial Markets and Policy indicate that the decision taken in February by the committee continues to support credit market activity though still fragile.
“Recent cuts in the Central Bank Rate have helped ease short-term interest rates and support lending. However, structural challenges in the financial system mean these benefits are taking time to fully reach businesses and households,” said KBA.
The association says credit to the private sector has rebounded from a contraction of 2.85pc in January 2025 to
6.3pc by November 2025, easing slightly to 5.9pc in December 2025, before rising to 6.4pc in January 2026.
Rate cut also supported the decline in bad loans as the ratio of gross non-performing loans (NPLs) to gross loans reduced to 15.5pc in January 2026, down from 16.7pc in October 2025 and 17.6pc in August 2025 notably in the real estate, manufacturing, trade, building and construction and personal and household sectors.
“Private-sector credit growth has improved but remains sluggish, with banks still cautious due to heightened lending risks and high levels of non-performing loans, which are leading to tighter credit conditions and constraining faster lending growth,” said KBA.
At the same time, average lending rates continue to ease, to 14.8% in January 2026, reflecting the transmission of CBR cuts sustained from September 2024.
KBA says short term market interest rates, particularly the interbank Kenya Shillings Overnight Interbank Average (KESONIA) and treasury bill rates have also declined in tandem.
Even as inflation rate remain within target range of 2.5pc–7.5pc, the association says energy risks as a result of the war in middle east which continues to affect oil prices remain.
Annual inflation rate rose from to 4.4pc in March from 4.3pc in February on account of an increase in non-core inflation from 10.1pc to 10.8pc on higher prices of food and non-alcoholic beverages and transport.
However, KBA noted that the exchange rate stability faces risks of a widening current account deficit and potential disruptions on diaspora remittances, arising from the protracted geopolitical conflicts.
