Monthly private sector lending by commercial banks soared by 328% to KES 10.7 billion in June 2025, up from KES 2.5 billion in the same month last year, primarily due to the lowering of the Central Bank Rate (CBR) and the reduction of the Cash Reserve Ratio (CRR).
The Central Bank of Kenya (CBK) lowered its interest rate to 9.5% in August 2025, marking its seventh consecutive cut from 13% in August 2024. Similarly, in February 2025, the monetary authority lowered the CRR by 100bps to 3.25%. Cash Reserve Ratio is the minimum percentage of a commercial bank’s total deposits that it is required by law to keep as reserves with the Central Bank. The CBK reduced these rates in a bid to boost lending to the private sector by lowering the cost of financing.
The National Treasury’s Quarterly Economic Budgetary Review reported that the private sector credit grew by 2.2% in the year to June 2025, down from 4.0% in the year to June 2024. Reduced credit growth was observed in the finance and insurance sector, trade (imports), mining and quarrying, business services, and private households.
Commercial Banks’ Lending Outlook in Q3
The CBK’s Credit Officer Survey Report for the quarter ended June 2025 indicated that private sector credit is expected to rise in the third quarter, driven by improved liquidity. In July 2025, growth in commercial banks’ lending to the private sector stood at 3.3%, an improvement from the 2.2% in June and -2.9% in January 2025. Growth in credit to key sectors of the economy, such as manufacturing, trade, building and construction, and consumer durables, also improved. Average commercial banks’ lending rates fell by 0.1 percentage points to 15.2% in July 2025, from 15.3% in June.
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