The New Lending Rule-book...

The Central Bank of Kenya (CBK) is tossing out the tangled web of risk-based lending for a cleaner, CBR-anchored approach—aiming to bring predictability, transparency, and discipline to banks’ lending trends. But why are bankers skeptical?

Good evening! It's Brian from The Kenyan Wall Street. This and more business stories in today's edition of ‘The Daily Brief’

THE NEW LENDING RULE-BOOK : The Rate-based Pricing Model

The Central Bank of Kenya (CBK) has proposed anchoring all bank lending rates to the Central Bank Rate (CBR), shifting away from the Risk-Based Credit Pricing Model introduced in 2019. What this means: loan rates across all banks would be tied to a single benchmark, potentially making borrowing costs more predictable and fair for consumers.

The new framework aims to enhance monetary policy transmission and create consistent, transparent loan pricing across the sector. Lending rates would be calculated as CBR plus a premium (“K”), which includes costs, expected returns, and borrower risk, subject to CBK approval and public disclosure.

The Kenya Bankers Association has countered with a proposal to use the two-month average of the interbank rate, but CBK rejected this due to its volatility and backward-looking nature. CBK cited implementation failures and inconsistencies in the current risk-based system as key drivers for reform. Public feedback on the proposal is open, with implementation expected immediately for new loans and a 3-month transition for existing ones. But what does this mean for the banking sector?

Today's Poll

Markets at a glance…

🟢 BOC Kenya Plc posted a profit after tax of KSh211.6 million for the year ended 31 December 2024, up from KSh198.1 million in 2023, even as revenue declined by 21.7% to KSh1.2 billion, driven by the absence of one-off donor-funded health projects delivered the previous year.

Final Dividend : KSh 6.15 per share.

EASING COSTS : Steel, Bitumen prices down, Cement still up

Construction material prices in Kenya declined slightly in Q1 2025, mainly due to falling steel, bitumen, and asphalt costs. Data from the Kenya National Bureau of Statistics shows the Construction Input Price Index dropped by 0.3% from the previous quarter.

Year-on-year input inflation slowed significantly to 0.18%, down from 3.56% in the same period last year. The most notable declines were in steel and reinforcement bars, dense bitumen macadam, and precoated chippings. However, some materials like cement and sand recorded modest increases, rising by 0.92% and 0.61% respectively. Here is the full article »»»»»

REGIONAL POWER : The Zambia-Tanzania-Kenya (ZTK) Power Interconnector Project

The Zambia-Tanzania-Kenya (ZTK) Power Interconnector Project has been officially relaunched in Lusaka with backing from COMESA, the World Bank, the European Union, and the United Kingdom. This initiative seeks to link the East African Power Pool (EAPP) with the Southern African Power Pool (SAPP), effectively creating one of the continent’s largest regional electricity markets. The original single-line interconnection plan has now been replaced by two separate national grid connections: the Kenya-Tanzania and Zambia-Tanzania interconnections. Construction on the Zambia-Tanzania segment, specifically from Kasama to Mbeya, is scheduled to start in January 2026, with contractors and consultants expected to be engaged by mid-2025. Here is the full article»»»»»

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SEEKING FAIRNESS : President Ruto calls for lending reforms…

President William Ruto has called for governance reforms at the IMF and World Bank, advocating for shareholder-elected directors and independent, professional management to reflect modern corporate governance standards. He criticized the current power imbalance that favors wealthy nations, highlighting the unfair allocation of IMF Special Drawing Rights, where poor countries received a mere 2.4%.

Watchlist: Ruto on U.S Tariffs & Global Trade…

♦️ Speaking in China, Ruto also questioned U.S. trade tariffs initiated under Donald Trump, noting that major U.S. corporations earn most of their profits abroad. He emphasized that traditional trade statistics understate the commercial surplus enjoyed by the Global North, as profits from global value chains largely accrue to them.

SUPPORTING MANUFACTURERS : Beneficiaries of EAC’s Import Duty Remission

The East African Community (EAC) has approved a duty remission allowing select Kenyan manufacturers to import over 200,000 metric tons of white refined sugar at a reduced 10% tariff for industrial use until April 2026. Mombasa Sugar Refinery Ltd received the largest allocation at 165,000 metric tons, followed by Coca-Cola Beverages Kenya Ltd (20,000 MT), Equator Bottlers Ltd (10,000 MT), Trufoods Ltd (5,000 MT), and Jetlak Foods Ltd (3,000 MT). Other beneficiaries include Devyani Food Industries (2,000 MT), Kenafric Beverages (1,500 MT), Al-Mahra Industries (1,000 MT), and Bidco Africa Ltd (1,000 MT). Njoro Canning Factory was granted 100 metric tons for its diverse production line including canned pineapples, yogurt, and chewing gum. The remission strictly applies to industrial use, preventing the sugar from entering retail markets, and the EAC will conduct a policy review after the 12-month period.

📌 Opinion & Commentary

KEBEDE : How Ready Are Ethiopia’s Retail Investors for the Stock Market?

After decades of operating a closed financial system, Ethiopia is entering a new economic era with the establishment of the Ethiopian Securities Exchange (ESX). The idea of a functioning capital market in Ethiopia is no longer a future vision; it’s taking shape today. With the regulatory groundwork laid and companies preparing for listing, all eyes are on how the market will take off. But among all this expectation, one critical question answered in this article is : “How ready are Ethiopian retail investors to actively participate in this new financial frontier?’’