Kenya's commercial banking sector closed the first quarter of 2026 with average lending rates at a 27-month low, but a near 800-basis-point spread between the cheapest and most expensive lender in the market has exposed deep fractures in monetary policy transmission.
- •Data published by the CBK on May 5th shows the overall weighted average lending rate fell to 14.70% in March 2026, down from 14.82% in December 2025, a decline of just 12 basis points over the quarter and 107 basis points year-on-year, the lowest since December 2023.
- •The deposit rate fell to 6.86%, its weakest level since August 2022, while the overdraft rate eased to 13.04% and the savings rate held flat at 3.22%, unchanged from December 2025.
- •The rates data arrives as the first clean post-migration read under the revised Risk-Based Credit Pricing Model, which required all existing variable-rate loans to migrate to a KESONIA-based pricing framework by February 28, 2026.
The model anchors lending rates to the Kenya Shilling Overnight Interbank Average plus a bank-specific risk premium approved by the CBK. In theory, a shared reference rate should compress the market's pricing dispersion. The March data suggests it has not, at least not yet.
Citibank N.A. Kenya remains the cheapest lender in the market at 10.80%, followed by Stanbic Bank Kenya at 11.75%, Standard Chartered Kenya at 11.87%, and Habib Bank AG Zurich at 12.66%, all international institutions anchored by lower cost-of-funds structures.
At the other end, Bank of Africa Kenya recorded the highest rate in the system at 18.57%, followed by Credit Bank at 17.97%, Access Bank Kenya at 17.83%, and HFC Limited at 17.09%. The spread between Citibank and Bank of Africa Kenya stands at 777 basis points, the clearest evidence that RBCPM has not yet produced a coherent pricing market across all 38 licensed commercial banks.
Of the 38 banks, 34 recorded lower lending rates year-on-year.
The deepest cuts came from CIB Kenya, which reduced its rate by 541 basis points from 20.50% to 15.09%, and Middle East Bank Kenya, down 357 basis points from 19.64% to 16.07%, both suggesting prior outlier pricing corrected under regulatory pressure rather than genuine competitive repricing.
Among tier-1 and mid-tier banks, I&M Bank cut by 279 basis points from 17.60% to 14.81%, Prime Bank by 286 basis points from 16.94% to 14.08%, and Sidian Bank by 223 basis points from 17.60% to 15.37%. Standard Chartered's 220-basis-point reduction from 14.07% to 11.87% cements its position in the sub-13% cluster, a tier occupied almost exclusively by international banks.
Four banks moved in the opposite direction with Kingdom Bank recording the largest increase in the system, up 301 basis points from 14.42% to 17.43%, crossing from below the system average to the fourth most expensive lender in a single year.
Ecobank Kenya rose 140 basis points from 13.82% to 15.22%, dropping out of the cheapest-lenders tier entirely after featuring in that group as recently as January 2026. State-owned Consolidated Bank added 69 basis points to reach 14.00%, and Equity Bank, Kenya's largest lender by customer base, edged up 12 basis points to 15.00%, a marginal but directionally inconsistent move for a tier-1 institution now sitting above the system average.
At the laggard end of the cutters, Bank of Africa Kenya trimmed just 6 basis points over 12 months, Credit Bank 5 basis points, SBM Bank Kenya 25 basis points, and Development Bank of Kenya 15 basis points, all transmitting less than 15% of the system's average annual reduction against a backdrop of 425 basis points in CBR cuts since August 2024.
The Bigger Picture
Deposit rates have fallen 247 basis points year-on-year against 107 basis points on the lending side, meaning banks have repriced liabilities more than twice as fast as assets, a margin-widening pattern that persists.
Private sector credit growth reached 8.1% year-on-year in March 2026, the strongest reading since January 2024 and the 13th consecutive month of positive growth, recovering from a trough of negative 2.9% in January 2025. The gross non-performing loan ratio edged up to 15.6% in March from 15.4% in December 2025, driven by deterioration in personal and household lending, trade, agriculture, and manufacturing, though the ratio remains more than 200 basis points below the August 2025 cycle peak of 17.6%.
The MPC held the CBR at 8.75% on April 8, pausing the easing cycle amid rising non-core inflation, the April 14 fuel price increase, and a decline in FX reserves from US$14.6 billion to US$13.3 billion between March and April.
Whether commercial bank lending rates have further room to fall will depend on the June MPC decision and whether the CBK's enforcement campaign against non-compliant lenders finally closes the gap between the cheapest and most expensive credit in the Kenyan market.
