The Central Bank of Kenya (CBK) has announced a revised Risk-Based Credit Pricing Model (RBCPM) for the banking sector, with effect from September 1, 2025.
CBK says the new framework is designed to strengthen monetary policy transmission, enhance transparency in lending and ensure that credit pricing reflect the risk profiles of borrowers.
The revised model is anchored on the overnight interbank average rate, now renamed the Kenya Shilling Overnight Interbank Average (KESONIA).
According to the regulator, the benchmark aligns with international best practices and closely tracks the Central Bank Rate (CBR) under the current monetary policy framework.
Under the new structure, the total lending rate will be calculated as KESONIA+Premium (K)where the premium covers costs related to lending, returns to shareholders and the borrower’s risk profile. The total cost of credit will be expressed as KENSONIA+K+Fees and Charges, with fees including origination, processing, negotiation and commitment charges.
“The changes will apply to all variable rate loans, expect for foreign currency denominated and fixed rate loans. In case where KESONIA is not practical, banks may use the CBR as an alternative reference rate,” stated CBK.
Implementation will take place in two phases. New variable rate loans will transition to the revised RBCPM starting September 1, 2025, while existing variable rate loans will shift from February 28, 2026, following a six-month adjustment period.
To promote transparency, banks will be required to publish on their websites, as well as on the Total Cost of Credit(TCC) portal, their weighted average lending rates, average premium(K) and the full breakdown of fees and charges applicable to each product.
