The Co-operative Bank of Kenya (Co-op Bank) will increase its lending rate to 14% starting tomorrow, November 7, 2023. This is the highest lending rate in Kenya since 2019.
In an announcement to customers, the lender stated that the base lending rate on Kenya Shilling denominated credit facilities will rise to 14 percent. This means that the cost of financing a loan will increase, increasing lending costs for borrowers.
The bank’s decision to increase its lending rate comes amid a rising interest rate environment in Kenya. In July 2023, the Central Bank of Kenya (CBK) Monetary Policy Committee (MPC) increased its base lending rate from 9.5 percent to 10.5 percent to curb runaway inflation, which had risen to eight percent in June from 7.9 percent in May.
Other financial institutions in Kenya that have increased their lending rates in recent months include Equity Bank and NCBA Bank.
The increase in lending rates by the Co-operative Bank of Kenya and other financial institutions in Kenya will have a number of implications for businesses and consumers.
For businesses, the higher lending rates will make it more expensive to borrow money to invest in their operations. This could lead to a slowdown in economic growth.
For consumers, the higher lending rates will make it more expensive to borrow money to buy homes, cars, and other goods and services. This could lead to a decrease in consumer spending.
The increase in lending rates in Kenya is also being driven by a number of other factors, including:
- The global economic slowdown, which is reducing demand for Kenyan exports and putting downward pressure on the Kenyan shilling.
- The rising cost of living, which is increasing input costs for businesses and reducing disposable incomes for consumers.
- The ongoing political uncertainty in Kenya, which is deterring investment and economic activity.
The Kenyan government is taking a number of steps to address the rising cost of living and to support economic growth. These measures include:
- Subsidizing the cost of fuel and other essential commodities.
- Increasing the minimum wage.
- Expanding social safety nets.
- Investing in infrastructure and other development projects.
However, it remains to be seen whether these measures will be enough to offset the negative impact of the rising interest rate environment on the Kenyan economy.