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Repos are short-term loans that allow banks to borrow from CBK by offering Treasury bonds as collateral and committing to repurchase them later at a premium.
This increase comes ahead of a major policy shift in the US, Kenya’s biggest remittance source, where a new law signed this month introduces a 3.5 percent excise tax on cross-border money transfers starting January 2026.
The average interest rate charged by commercial banks on SME loans climbed from 15.5 percent in December 2022 to 16.4 percent in 2024.
Only 35 percent of the digital lenders are carrying out enhanced due diligence, a critical process for identifying risky customers and transactions.
The Monetary Policy Committee (MPC) said the decision was aimed at encouraging more borrowing by the private sector to stimulate economic activity. However, while borrowing is becoming cheaper, returns on savings have dropped.
The move is expected to ease early and late-day payment processing for institutions and businesses handling large or time-sensitive transactions.
The CBK survey, which captures views from senior leaders in private sector organisations such as the Kenya Association of Manufacturers, Kenya National Chamber of Commerce and Industry, and the Kenya Private Sector Alliance, paints a grim picture for job seekers and workers.
The Kenya Bankers Association (KBA) warns that such a move would effectively introduce interest rate caps.
"CBK proposes the use of the policy rate (Central Bank Rate) as the common reference rate for determining lending rates in the Kenyan banking sector.
Although prices are expected to stabilize after the initial surge, a significant number of farmers voiced concerns about the growing influence of middlemen and brokers in the supply chain.
