CBK issues revised risk-based credit pricing model
The Central Bank of Kenya (CBK) has announced the issuance of a revised Risk-Based Credit Pricing Model (RBCPM) for the banking sector, following an extensive consultation process concluded on April 23, 2025.
The revised model incorporates feedback from a wide range of stakeholders including commercial banks, development partners, consultancy firms, non-bank financial institutions, academia, corporate firms, industry associations and individuals.
CBK confirmed that all comments were carefully reviewed before finalizing the new framework.
The updated RBCPM seeks to strengthen monetary policy transmission, enhance transparency in lending and promote responsible lending by ensuring that credit pricing reflects the actual risk profiles of borrowers.
The new model is anchored on the overnight interbank average rate, which has now been renamed the Kenya Shilling Overnight Interbank Average (KESONIA). The rate has been introduced to align Kenya’s practices with international best standards.
KESONIA also closely matches the Central Bank Rate (CBR) under the current monetary policy framework.
Under the revised RBCPM, the total lending rate will be calculated as KESONIA + Premium (K), where the premium covers lending costs, shareholder returns and the borrower’s risk profile.
The total cost of credit will be defined as KESONIA + K + Fees and Charges, which include origination, processing, negotiation and commitment fees.
The revised RBCPM will thus take effect on September 1, 2025 for all new variable rate loans.
For existing variable rate loans, the framework will become effective on February 28, 2026, after a six-month transition period to finalize the necessary arrangements.
KESONIA will apply to all variable rate loans, excluding those denominated in foreign currency and fixed rate loans. Where KESONIA is not practical, banks may use the Central Bank Rate as an alternative reference.
To enhance transparency, CBK has directed banks to publish on their websites and on the Total Cost of Credit (TCC) website their weighted average lending rates, weighted average premiums and detailed fees and charges for each lending product.
Additionally, CBK has provided a Frequently Asked Questions (FAQ) document on KESONIA to guide borrowers and lenders, attached as an appendix to the directive.
The Central Bank emphasized that the revised RBCPM marks a major step in aligning Kenya’s credit pricing framework with international best practices, while safeguarding the interests of borrowers through responsible and transparent lending.
Author: Moureen Koech
Moureen Koech is a passionate Digital Journalist, an adept Agribusiness Writer with a keen eye for news and an impactful story-teller,whose stories provide key value to Agripreneurs and stakeholders in the Agricultural sector
