All Kenyan banks must urgently comply with the Central Bank of Kenya (CBK) directive to lower lending rates to stimulate credit growth in the private sector — or be declared economic saboteurs.

Following the recent revision of the Central Bank Rate (CBR) to 10.75 percent and the Cash Reserve Rate (CRR) to 3.25 percent, banks now have no excuse to delay passing on these benefits to their customers.

Historically, banks have been slow to adjust their rates, even when the anchor interest rate has decreased. This resistance has stifled private sector growth, which is essential for economic stability and job creation. By maintaining high lending rates, banks are not just maximising profits — they are actively undermining economic progress.

CBK Governor Kamau Thugge has emphasised that the reduction in CRR will release additional liquidity to banks, making it easier for them to lower their cost of funds. This should naturally translate into more affordable loans for businesses, which are vital for driving economic growth.

Encouragingly, tier-one banks like Co-op, Equity, and KCB have already announced reductions in lending rates, setting a precedent that all other lenders must follow.

Failure to lower rates, despite the decreased cost of funds, is nothing short of economic sabotage. It is shameful that the CBK has to conduct on-site inspections to enforce compliance when banks should be doing the right thing voluntarily. Fortunately, amendments to the Banking Act empower the CBK to penalise non-compliant banks, and it is time for the regulator to show no mercy.

The private sector is the backbone of Kenya’s economy. When businesses have access to affordable credit, they can expand, create jobs, and contribute to economic stability. Conversely, high lending rates stifle entrepreneurship, limit growth, and keep the economy stagnant.

The decision to lower the CBR and CRR was influenced by stabilising inflation, which is expected to remain below the 7.5 percent benchmark due to low core inflation, stable energy prices, and a steady exchange rate. These favourable conditions create the perfect environment for banks to make credit more accessible.

Industry players, including the Kenya Association of Manufacturers and the Kenya Private Sector Alliance, have long criticised the lack of affordable credit as a significant barrier to growth. The time for excuses is over. Banks must comply now or face the consequences of being labeled as enemies of progress.