A recent analysis of current lending data reveals that commercial banks are applying premiums ranging from 4.11 percent to 16.57 percent on personal loans before the inclusion of fees and other charges, hence exposing significant disparities in how lenders evaluate costs and borrower risk under Kenya’s new loan pricing framework. The transition to the new pricing model was completed by the end of February 2026, requiring all lenders to adopt either the Central Bank Rate (CBR) or the Kenya Shilling Overnight Interbank Average (Kesonia) as their benchmark for setting loan rates. Prior to this change, lenders lacked a uniform benchmark, with each institution applying its own internal base rate.
Bank-Level Premium Disparities
The highest mark-ups are observed at I&M (16.57 percent), NCBA (16.34 percent), Stanbic (16.14 percent), and M-Oriental (15.2 percent). Consequently, these four institutions also report the highest total interest rates on personal loans after adding the selected benchmark rate: I&M at 25.32 percent, NCBA at 25.09 percent, Stanbic at 24.87 percent, and M-Oriental at 23.95 percent.
The Kenya Bankers Association has indicated that such a wide spread in premiums was expected, as banks take time to assess individual borrower risk profiles rather than relying on broad segmented categories. Dr. Samuel Tiriongo, Head of Research at the Association, says that the flexibility inherent in the premium component, referred to as the “K” factor, allows banks to accommodate a wider range of customers instead of excluding higher-risk borrowers altogether.
Under the new pricing structure, the total cost of credit is determined by adding the benchmark rate (either CBR or Kesonia) to the premium (K), with any applicable fees charged separately. The lenders are permitted to define the components of the premium themselves, which may include operating costs, desired returns to shareholders, and the specific risk premium assigned to the individual borrower. This discretion explains the notable variation in premiums across different lenders, reflecting divergent internal strategies and risk appetites.
