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Kenya's Co-op bank caps new loans at 14.5pc

Friday August 26 2016
COOP

Co-operative Bank branch in Nairobi. PHOTO | FILE

Kenya’s Co-operative Bank has announced that it has started issuing new loans as per the new interest rate regime with immediate effect.

This comes as the country’s second largest lender by market share yielded to growing public pressure and defied calls by the Kenya Bankers Association (KBA) to maintain existing credit and deposit terms until further guidance from the regulator.

In a circular to all branch managers Friday, the Group’s managing director Gideon Muriuki said all new credit facilities would attract a rate not exceeding 14.5 per cent, making it the first lender to adopt the new loan pricing regime.

“In the foregoing and for business continuity, we advise that pending receipt of full guidelines from our regulator the Central Bank of Kenya particularly on the applicable base rate, all new credit facilities shall be at a rate not exceeding 14.5 per cent,” said Mr Muriuki.

“Do refresh the relevant facility offer letters in liaison with our credit management division,” he added.

The current Central Bank Rate (CBR) is set at 10.5 per cent.

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President Uhuru Kenyatta on Wednesday signed the Banking (Amendment) Bill 2015 into law capping lending rates at four percentage points above the CBR and deposit rates at least 70 per cent of the central bank’s benchmark lending rate.

READ: President Uhuru signs Bill capping bank interest rates

The bank’s lobby group KBA had insisted that existing credit and deposit terms would apply to new loans until the government sets regulations but customers lobby group the Consumer Federation of Kenya (Cofek) said all borrowers must benefit from the new rates with immediate effect.

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