CBK to Physically Inspect Bank Books to Confirm Reduction of Loan Rates 

‍In Summary

1. The CBK is imposing fines of up to Ksh20 million on banks that fail to reduce lending rates, despite multiple cuts to the benchmark rate, and has slashed the cash reserve ratio, freeing up Ksh73.7 billion for lending to stimulate private sector credit growth.
2. US firm Everstrong Capital is seeking to tap into Kenya’s pension funds to finance the Ksh465.12 billion Nairobi-Mombasa Expressway, expected to ease congestion and improve transport efficiency.
3. President Ruto’s affordable housing project is facing delays and is set to fall short of the 200,000-unit annual target, with less than 1000 units expected by year end.
4. The National Treasury is reviewing Kenya’s public-private partnership framework following the cancellation of the JKIA deal with the Adani Group, aiming to address concerns over transparency and the suitability of current procurement processes.
5. The CBK has reduced its official lending rate to 10.75% and slashed the Cash Reserve Ratio (CRR) to 3.25%, aiming to boost economic growth and ensure banks pass on reduced costs to borrowers through on-site inspections and penalties for non-compliance.

The CBK is cracking down on banks that fail to lower lending rates despite multiple benchmark rate cuts, imposing hefty fines of up to Ksh20 million or three times the monetary gain, plus daily penalties of Ksh100,000 per violation. According to the Business Daily, the regulator has also slashed the cash reserve ratio, freeing up Ksh73.7 billion for lending, aiming to stimulate private sector credit growth. However, banks have been slow to pass on the benefits, citing higher locked-in deposit costs. With private sector credit demand shrinking to a 22-year low, the CBK is now conducting on-site inspections to ensure compliance and push for cheaper credit access.

Read Also: Should You Involve Your Family in Tracking Investments?

US firm Everstrong Capital is seeking to tap into Kenya’s pension funds to finance the planned 440km Nairobi-Mombasa Expressway, having partnered with CPF Capital & Advisory to facilitate fundraising. The expressway, expected to ease congestion and improve transport efficiency, is projected to cost $3.6 billion (Ksh465.12 billion), with investments anticipated from global investors, development agencies, and local pension funds. Previous attempts to build the road, including a deal with Bechtel in 2018, stalled due to disagreements over financing models, with Kenya rejecting a state-funded approach. This initiative highlights the growing role of pension assets—currently at Ksh1.97 trillion—in national infrastructure projects as reported in the Business Daily.

President William Ruto's affordable housing project is set to miss its annual target of 200,000 units by a significant margin, with Lands Cabinet Secretary Alice Wahome estimating only 700 to 800 units will be delivered this year. According to Nation the project has faced setbacks due to court challenges, delays in funding, and disrupted construction timelines. Despite this, Wahome expressed optimism that the goal of one million units by 2027 remains achievable, with 140,000 units completed so far and over 600,000 in the pipeline. In the next two months, 180 units, including those in Mukuru slums, are expected to be handed over to the public. Despite legal and political challenges, the government remains committed to expanding affordable housing, particularly targeting low- to middle-income earners.

Read Also: I Got a Job Offer Paying Ksh20k More in Net, But No Benefits, Should I Take It?

The National Treasury is set to review Kenya’s public-private partnership (PPP) framework following the fallout from the canceled Jomo Kenyatta International Airport (JKIA) deal with India’s Adani Group. The move aims to assess the suitability of current procurement processes, with concerns raised over transparency and unsolicited deals. According to the Business Daily the World Bank had warned against such deals, citing risks to public confidence and potential protests. With Kenya relying on PPPs to fund infrastructure amid budget constraints, the review will scrutinize project identification, feasibility, tendering, and implementation. Currently, Kenya has five major PPP projects worth Ksh129.2 billion under implementation, with 32 others at various stages.

In a report by Capital Business the Central Bank of Kenya (CBK) has reduced its official lending rate by 50 basis points to 10.75%, aiming to boost economic growth amid stable inflation and lower energy prices. The Monetary Policy Committee (MPC) also cut the Cash Reserve Ratio (CRR) by 100 basis points to 3.25% to support lending. The move comes as global central banks, including Kenya's, lower interest rates at varying paces. CBK is also conducting inspections to ensure banks implement the Risk-Based Credit Pricing Model (RBCPM), with penalties for those not passing on reduced funding costs to borrowers.