Navigating the Lending Landscape

NAIROBI, KENYA – The Central Bank of Kenya (CBK) has released data detailing the most and least expensive banks for personal loans, offering crucial transparency for Kenyan borrowers. The analysis, based on the total cost of credit for a KSh 100,000 personal loan repaid over 12 months, reveals that hidden fees and additional charges are major factors in the overall expense of borrowing, sometimes more so than the advertised interest rate.

The data, accessible through a portal managed by the Kenya Bankers Association (KBA), covers 33 commercial banks and aims to empower consumers to make more informed financial decisions by comparing the Annual Percentage Rate (APR), which includes all associated costs.

The Most and Least Expensive Lenders

According to the latest disclosures published on Thursday, October 30, 2025, small lender Habib Bank AG Zurich offers the most affordable personal loan. For a KSh 100,000 loan over one year, a borrower would repay a total of KSh 112,750. This is based on an annual interest rate of 12.75% with no additional fees, meaning the entire cost of the loan is pure interest.

At the other end of the spectrum, Sidian Bank is listed as the most expensive lender for the same loan facility. A borrower taking a KSh 100,000 loan from Sidian would repay an average of KSh 131,100, a staggering KSh 18,350 more than at Habib Bank. Sidian's total cost comprises a 16.22% annual interest rate (amounting to KSh 16,220), supplemented by KSh 12,400 in bank charges and KSh 2,480 in third-party costs.

Other relatively affordable lenders include Housing Finance Corporation (HFC) with a total cost of KSh 13,000, ABC Bank at KSh 14,750, and Standard Chartered Bank at KSh 15,000 for the same loan amount. Conversely, Guardian Bank and Access Bank Kenya were ranked the second and third most expensive, with total credit costs of KSh 28,050 and KSh 24,780, respectively.

The Hidden Costs of Borrowing

The data underscores the critical importance of looking beyond the headline interest rate. For instance, Middle East Bank has one of the highest interest rates at 23.98%, but because it does not levy additional fees, its total cost of credit (KSh 23,980) is lower than that of several other banks. This highlights how internal bank charges and third-party fees for services like insurance and legal work can significantly inflate the final repayment amount.

This transparency initiative is part of a broader push by the CBK to regulate lending practices and ensure fairness for consumers. The CBK has been pressuring commercial banks to lower borrowing costs, having made eight consecutive cuts to its benchmark Central Bank Rate (CBR), which stood at 9.25% as of October 7, 2025. Despite these cuts, average commercial lending rates have remained relatively high, declining only modestly to 15.1% in September 2025.

Forthcoming Changes in Loan Pricing

The Kenyan banking sector is on the cusp of a significant shift in how loans are priced. A new risk-based pricing regime is set to be fully implemented by the end of February 2026. This new model will be anchored on the Kenya Shilling Overnight Interbank Average (KESONIA), a rate that is more responsive to CBK's policy changes. The total lending rate will be calculated as KESONIA plus a premium ('K') that reflects the borrower's risk profile, the bank's operational costs, and shareholder returns.

The KBA has confirmed that all banks are expected to have their new pricing models approved and ready for implementation for new loans starting in December 2025. This transition is intended to make the transmission of monetary policy more effective, meaning that when the CBK cuts its benchmark rate, the savings should be passed on to borrowers more quickly. As part of this reform, the Total Cost of Credit portal is also being revamped to cover a wider range of loan facilities beyond personal and mortgage loans.

For Kenyan consumers and businesses, this signals a move towards greater transparency and potentially more competitive loan pricing. The onus, however, remains on the borrower to utilize tools like the KBA's cost of credit website to scrutinize loan offers and understand the full financial commitment before signing any agreement.