The Central Bank of Kenya (CBK) has introduced a revised Risk-Based Credit Pricing Model (RBCPM) for the banking sector, marking a significant step in fostering greater transparency and accountability in lending. Following an extensive consultation process that began in April 2025, the new framework is designed to promote responsible credit practices by directly linking loan pricing to a borrower’s specific risk profile. This approach ensures that credit costs are more reflective of actual risk, while also protecting borrowers through clear disclosure of charges.
A major highlight of the revised model is the adoption of the Kenya Shilling Overnight Interbank Average (KESONIA) as the new reference rate. KESONIA, a formal renaming of the overnight interbank average rate, brings Kenya’s financial markets in line with global benchmarks such as the UK’s SONIA and the US’s SOFR. The lending rate will now be calculated as KESONIA + Premium (“K”), where the premium incorporates a bank’s operational costs, shareholder returns, and the borrower’s individual risk profile. This structured approach aligns Kenya’s credit system with international standards while strengthening market integrity.
The implementation timelines are also clearly set out. The revised RBCPM will apply to all new variable rate loans beginning September 1, 2025, while existing variable rate loans will transition to the new model by February 28, 2026. This phased approach provides banks and borrowers with a smooth transition period, ensuring that the change is adopted effectively without disrupting ongoing lending operations. Importantly, the framework not only sets rules for calculation but also enforces transparency across the sector.
All banks will now be required to publish their weighted average lending rates, premiums, and applicable fees for each loan product both on their websites and on the official Total Cost of Credit portal. To reinforce accountability, CBK will publish the daily KESONIA rate on its website, ensuring borrowers can track the benchmark themselves. This new model signifies a decisive move towards a more open, predictable, and borrower-friendly credit environment, ultimately contributing to a stronger and more resilient financial sector in Kenya.
Kenya Implements Transparent Credit Pricing Framework Effective September 2025
