Central Bank of Kenya. Photo | Courtesy.
The Central Bank of Kenya (CBK) has invited members of the public to share their views on a newly issued consultative paper reviewing the Risk-Based Credit Pricing Model (RBCPM), a framework initially introduced in 2019 to address challenges in Kenya’s credit market.
The RBCPM, a joint initiative between CBK and the banking sector, was developed to tackle issues such as high lending rates and opaque pricing mechanisms.
By anchoring credit risk pricing on market driven frameworks, the model aimed to improve transparency and efficiency in loan pricing.
“With the lapse of five years, a reassessment of RBCPM was deemed necessary to determine if it still effectively complements the ongoing reforms in the banking sector,” the Central Bank said in a public notice issued onWednesday.
As part of its review, CBK is proposing the adoption of the policy rate (Central Bank Rate or CBR) as the standard reference point for determining lending rates in the banking sector.
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The notice explains that lending rates will henceforth be calculated by adding a premium referred to as “K” to the CBR, reflecting each bank’s cost of funds and risk profile.
“The Central Bank will publish the components of each bank’s lending rate premium (‘K’) on its website, the Total Cost of Credit (TCC) website, and in two newspapers for transparency,” the CBK stated.
The regulator has urged all stakeholders to participate in shaping the revised model by submitting their feedback before May 2, 2025.
Comments can be submitted via email to fin@centralbank.go.ke under the subject COMMENTS – CONSULTATIVE PAPER ON THE REVIEW OF THE RISK-BASED CREDIT PRICING MODEL.
The consultative paper is available for download on the CBK website at https://www.centralbank.go.ke/2025/04/22/cbks-consultative-paper-on-risk-based-credit-pricing-model/.
