The revised rates will apply to all existing and new borrowers whose loans are denominated in Kenya shillings.
Equity Group has announced an increase in its lending rates effective July 10 as the era of expensive loans sets in after the Central bank increased its benchmark lending rate to commercial banks by 100 basis points to 10.5 percent last month (June 26).
In a public notice last week, the regional lender with operations in Kenya, Uganda, Tanzania, Rwanda and Democratic Republic of Congo said the adjustment of interest rate on loans is intended to reflect the lender’s revised reference rate of 14.69 percent plus a margin based on the customer’s risk profile.
The revised rates will apply to all existing and new borrowers whose loans are denominated in Kenya shillings.
Central Bank of Kenya (CBK), through its Monetary Policy Committee increased its policy rate to 10.5 percent from 9.5 percent on June 26, in an attempt to curb inflationary pressures fuelled by soaring food and fuel prices.
The overall inflation for June remained elevated at 7.9 percent largely due to an increase in the price of food, fuel and electricity according to Kenya National Bureau of Statistics data. Inflation for May stood at eight percent.
The increase in interest rates is, however, expected to trigger high loan default rates in the banking sector and stifle credit to the productive sectors of the economy.
Growth in private sector credited remained unchanged at 13.2 percent in April and May this year.
According to the central bank, overall inflation is expected to remain elevated in the near term mainly due to the recent increases in electricity prices, removal of fuel subsidy and associated second round effects.
The National Treasury has already written to CBK setting the inflation target for the 2023/24 fiscal year. The target is set at five percent with a flexible margin of 2.5 percent on either side in the event of adverse shocks.