NAIROBI, Kenya, Feb 2 – A banker is foreseeing a continuous reduction in Interest rates in the next 12 months after the Central Bank of Kenya (CBK) lowered the Kenya Banks Reference Rate (KBRR) by 0.6 percent.
Speaking to Capital FM Business, Barclays Bank of Kenya Business Banking Director Humphrey Muturi said the lowering of the KBRR to 8.54 percent from 9.13 percent will see interest rates lowered.
“The recent reduction in KBRR from 9.13 percent to 8.5 percent conveys an immediate benefit to customers with that particular reduction,” he pointed out citing that there is a clear indication by government that they are keen to towards reducing interest rates.
Muturi also attributes the lowering of interest rates to the reduction in global oil prices which will lower the import bills which will result in lower reduction on inflation.
“The reduction in global fuel prices will translate into lower demand for borrowing by government to be able to finance the importation of oil; there should be a knock-on effect with interest rates further softening,” he said.
He said lowering of the interest rates will see an increase in investments in the country as it will now be easy to access cheap loans from banks.
“Businesses who would have been a lot more conservative in investing and borrowing become a lot bolder and they can afford credit. It has a further impact as the risk of non-performing loans also reduces and credit becomes more available a key driver for economic growth,” he said.
Currently commercial banks average lending rates stand at 15.94 percent, having fallen by one percent since last July when it stood at 16.91 percent.
However, the Monetary Policy Committee (MPC) retained the Central Bank Rate (CBR) at the same level of 8.5 percent, where it has been since April 2013.
KBRR was first set last July at 9.13 percent introduced to increase transparency in the pricing of loans and will be reviewed in July 2015.