In a move that brings some relief to borrowers, Equity Bank has announced a reduction in its reference rate to 17.83%, effective from 9th September 2024. This change follows last month’s adjustment of the Central Bank Rate (CBR) by the Central Bank of Kenya (CBK), which saw the rate decrease from 13% to 12.75%, a cut of 25 basis points (bps).
The decision by Equity Bank to lower its Equity Bank Reference Rate (EBRR) from the previous 18.24% to 17.83% aligns with the CBK’s move and signals a shift that could ease borrowing costs for consumers and businesses alike. This new rate will apply to all new Kenya shilling-denominated credit facilities, making it particularly important for anyone considering taking out a loan or expanding their business.
Under the new structure, borrowers will be charged the EBRR (17.83%) plus a margin that could go as high as 8.5%, depending on the risk profile and type of credit facility. This means that for some borrowers, the interest rates could be as high as 26.33% per annum. However, with the reduction in the reference rate, borrowers who had previously been servicing loans at higher rates may see some reprieve.
It’s important to note that the margin charged above the reference rate varies depending on the type of loan, the borrower’s creditworthiness, and other factors. For this reason, businesses and individual borrowers are encouraged to seek clarity from their relationship managers to fully understand how this reduction could impact their loan terms.
For businesses, especially small and medium enterprises (SMEs), access to affordable credit can be the difference between growth and stagnation. A lower interest rate eases the burden of financing and allows businesses to allocate more funds toward operations and investments. Additionally, with Kenya’s economy gradually recovering post-pandemic, this reduction in rates comes as a welcome move for businesses looking to expand their operations or meet working capital needs.
The real estate and construction sectors, which are heavily reliant on credit facilities, may also benefit from this reduction. As interest rates drop, more potential homeowners and developers are likely to access loans at favorable terms, driving demand in these sectors.
Equity Bank has committed to monitoring the market closely and will adjust its rates as necessary in line with further changes from the CBK. While the current reduction is significant, future shifts in the economic landscape, inflation trends, and monetary policy will determine whether rates continue to drop or begin to rise again.
For now, borrowers in Kenya can take advantage of these lowered rates. This change represents a positive step for individuals and businesses alike, as reduced borrowing costs will likely stimulate more activity in the economy. Equity Bank’s move comes at a crucial time when businesses are looking for ways to optimize costs and drive growth.
As always, Equity Bank encourages its customers to reach out to their Relationship Managers or visit their nearest branches for more information on how this new rate will apply to their credit facilities.
For any clarifications, Equity Bank has also provided a dedicated contact number and remains committed to serving its customers efficiently during this transition.
