👨🏿‍🚀TechCabal Daily – Kenyan banks to lower lending rates

Kenyan banks agree to lower commercial lending rates

On December 5, the Central Bank of Kenya (CBK) lowered its benchmark interest rate by 75 basis points from 12% to 11.25%—a decision that the CBK governor Kamau Thugge attributed to the inflation rate slowdown in Kenya. This was the third successive time that the apex bank had lowered rates after cuts in August and October.

Despite these cuts, commercial banks have been slow to lower their lending rate, which is still high at an average 17.15%. This has frustrated the Central Bank’s efforts to stimulate borrowing activities in the country to encourage economic growth. 

“All we are asking is for banks to be fair and to act in the same way that they were quick to raise lending rates when the policy rate was increasing and the treasury rates were increasing,” Thugge said.

Over the last few months, the prices of goods and services have dropped in Kenya—which has prompted a stable inflation rate. When prices drop, people and businesses can spend less on goods and have more confidence to borrow money for other needs like investment.

While the high rates of these commercial banks have discouraged consumer borrowing, commercial banks also have a cogent reason for their hike. Non-performing loans (NPLs), which is a metric that measures how much of the loans lenders are able to recover, hit a multi-decade high of 15.5% in April 2024. As of October 2024, the rate has accelerated to 16.5%.

To compare the rallying rates, the CBK reported in Q4 2023 that the industry’s gross NPL ratio was 14.8%. NPL ratio quickens when borrowers struggle to repay their loans—which brings the situation full circle to the state of the economy. As a result of all these compounding issues, private sector lending in Kenya has since slowed.

The good news is that banks, through the Kenya Bankers Association (KBA) which has 43 member banks, have now responded to CBK’s directive to lower lending rates. Kenyan banks will start easing their lending rates in December 2024 to mirror the Central Bank’s rates. However, they will only do so “progressively” to cushion themselves from the financial shock that will likely arise from dropping rates and dealing with the loan losses.

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Cyber fraud and identity theft are usually rampant in December. This is when retail customers, who are the targets of identity theft, are most vulnerable.

During the December holidays, people shop more, spend more, and are often in a hurry. This makes it easier for scammers to trick them. Many people buy things online, where fake websites and deals are common. People are also distracted and may not notice something wrong with phishing links. 

All of this gives fraudsters a better chance to steal money or personal information which they can use to commit fraudulent acts with the identities they obtain.

It is common to see a lot of warnings urging people to be careful during this period. Blowing the first whistle, the National Information Technology Development Agency (NITDA) has warned retail banking customers to be careful of a malware called Grandoreiro, which targets unsuspecting victims through phishing links.

Grandoreiro is a Brazilian banking trojan which allows threat actors to steal your personal information by bypassing the security measures of your banking apps, once they gain access to your phone. It has been active since 2016 and has now spread globally, with Africa recently joining the list.

Fraudsters who use Grandoreiro typically send an email to banking customers that resembles the ones they typically receive from their banks. The email contains a PDF file, which when opened, redirects you to the malicious webpage. Once the victim downloads the malware, the trojan instantly locks itself into the user’s banking apps and payload, and steals their personal information.

Babatunde Olofin, the Managing Director of Moniepoint, a Nigerian fintech, has also warned users against sharing their bank accounts publicly, citing that their information can be stolen. As cyber activities peak this period, it is important for users to protect their identities and banking information to avoid falling victims to cyber fraud.