Central Bank of Kenya issues revised risk-based credit pricing model anchored on KESONIA with phased implementation from September 2025

The Central Bank of Kenya has issued a revised Risk-Based Credit Pricing Model for the banking sector following a consultation launched on April 23, 2025. The revised framework anchors variable-rate loan pricing on the overnight interbank average rate, now renamed the Kenya Shilling Overnight Interbank Average (KESONIA), and sets out updated transparency and disclosure expectations for banks. Under the revised model, total lending rates are to be calculated as KESONIA plus a premium (K) covering lending costs, return to shareholders and the borrower’s risk profile, while the total cost of credit adds fees and charges to KESONIA plus K. KESONIA applies to all variable-rate loans except foreign currency-denominated loans and fixed-rate loans; where KESONIA is not practical or data is unavailable, use of the Central Bank Rate is permitted as an alternative or fallback. Banks must publish, on their websites and on the Total Cost of Credit website, their weighted average lending rates, weighted average premium (K), and fees and charges for each lending product. The revised Risk-Based Credit Pricing Model takes effect from September 1, 2025 for new variable-rate loans and from February 28, 2026 for existing variable-rate loans after a six-month transition period. Commercial banks are expected to update documentation, system references, pricing models and legal agreements to reflect the KESONIA naming convention, while the Central Bank of Kenya will publish KESONIA daily on its website.