NAIROBI, Kenya Apr 13 – Co-operative Bank of Kenya has slashed its base lending rate to 14 percent with effect from May 1 this year.
In a statement, Co-op Bank Group Managing Director Gideon Muriuki said the one percent drop was in reaction to efforts by the Central Bank’s Monetary Policy Committee (MPC) to steadily bring down the cost of lending in the country.
“The bank has been monitoring the market changes in interest rates and efforts to reduce the rates and thus stimulate the demand for credit,” Mr Muriuki said.
For its co-operatives societies business, the bank has also reduced the lending rate to 13 percent per annum from 14 percent. Mr Muriuki said the bank was at the forefront of offering affordable credit with an average lending rate of 12 percent.
This latest move by the bank could signal affordable borrowing for customers with the precedent for lower interests being set in the country.
Only last week Barclays Bank of Kenya cut its lending rates from 15.75 percent to 13.75 percent as a response to the Monetary Policy Committee’s lowering of the Central Bank Rate (CBR).
In the last twelve months, the MPC has slashed the CBR to 6.75 percent. Banks have however been slow to match this with lower lending rates.
Players in the banking sector have argued that the structural rigidities in credit supply inhibit lowering of rates adding it could be solved by offering more long-term loans.
Lowering of rates has already been welcome by the Kenya Association of Manufactures saying it would stimulate access to credit for the private sector.
The move by the two banks is likely to spur competition in the banking industry, which could ultimately see more banks lower their rates.