Jijenge Credit Welcomes Shift to Risk-Based Pricing as CBK Cuts Rate

Commercial banks have begun revising lending rates and transitioning to a new risk-based pricing framework ahead of the February 28 deadline, following the Central Bank of Kenya’s decision to cut the benchmark rate to 8.75 per cent.

Kenya’s leading credit-only microfinance institution, Jijenge Credit Limited, has welcomed the move, terming it a positive step toward making credit more accessible and affordable.

Under the leadership of Managing Director Peter Macharia Kamau, the institution said lower lending rates present significant opportunities for both households and businesses by easing borrowing costs and stimulating economic activity.

Kamau noted that reduced interest rates directly translate into cheaper loans, including mortgages, vehicle financing and business credit, enabling individuals to manage debt more comfortably. For borrowers on variable-rate facilities, the rate cut means lower monthly repayments and increased disposable income. This, he said, enhances affordability for major purchases and creates opportunities for refinancing or consolidating high-interest debt into more manageable facilities.

“Lower rates inject confidence into the market. They allow individuals to plan better, spend more freely and invest in long-term goals,” Kamau said.

Beyond households, the microfinance lender observed that the lower benchmark rate is likely to stimulate broader economic activity. Businesses can access capital at reduced costs, encouraging expansion, acquisition of new equipment and increased hiring. With cheaper financing, firms are more inclined to invest in innovation and productivity-enhancing projects.

Increased consumer spending, driven by reduced debt burdens, is also expected to boost sales across sectors, while lower borrowing costs may positively influence asset prices, including housing and corporate equities.

However, Kamau cautioned that while borrowers stand to benefit, savers may experience relatively lower returns in a low-rate environment.

As banks adjust to the risk-based pricing framework, stakeholders say the shift signals a more responsive credit market, with lending terms increasingly aligned to individual borrower risk profiles and prevailing economic conditions.