When the Central Bank of Kenya (CBK) issues a directive, the financial sector listens. And this week, a critical shift landed squarely on the desks—and mobile phones—of millions of Kenyan borrowers after KCB Bank publicly announced its transition to the Revised Risk-Based Credit Pricing Model (RBCPM), a framework crafted and mandated by the CBK.
The notice, signed and issued by KCB Bank and seen by Education News, marks a turning point in how credit will be priced across the country. Its clarity is unmistakable: beginning December 1, 2025, all new local-currency variable-rate loans will be priced under the new CBK-designed model. Existing loans will follow suit before the end of the CBK-imposed transition window closing February 28, 2026.
This is not merely an internal bank adjustment; it is a national financial policy shift.
The Authority Behind the Change
At the core of this move is the Central Bank of Kenya, the sole institution constitutionally empowered to regulate lending practices, protect consumers, and anchor monetary stability. CBK’s revised pricing model replaces the previous unstructured discretion used by commercial banks, which often left borrowers at the mercy of opaque lending formulas.
With this model, CBK is asserting its regulatory authority loudly and unambiguously. It is laying down a standardised mechanism intended to curb exploitative interest rates, expose hidden fees, and streamline the true cost of credit.
KCB Bank’s notice is therefore not simply an announcement—it is a compliance statement with a national directive.
What the New Model Means for Borrowers Under the revised CBK framework:
Every loan’s interest rate must now be tied to a Common Reference Rate, which is the Central Bank Rate (CBR).
Banks may add a customer-specific risk-based premium (K)—but this must be transparent and justified, not arbitrary.
Borrowers will see full disclosure of all fees, charges, and total credit costs, closing the loopholes that previously allowed hidden or inflated extras.
ALSO READ:
EACC uncovers bribery syndicate at KIHBT Kisii campus, instructor arrested
This is the most significant consumer-protection measure in Kenya’s lending landscape since the reform of the interest-rate-cap era.
Why It Matters to Every Household and Worker
Loan pricing shapes livelihoods. It determines whether a teacher can finance a home, whether a farmer can purchase seed and equipment, or whether a young graduate can start a business. When pricing is unpredictable or predatory, households suffer. When regulation becomes firm and transparent, prosperity becomes attainable.
By forcing all banks to toe the regulatory line, CBK is anchoring fairness into the heart of Kenya’s credit system. And by publicly signalling early compliance, KCB is acknowledging this authority and preparing its millions of customers for the new era of disciplined lending.
Transparency, Discipline, and Consumer Protection
The editorial truth is this: Kenya has, for too long, operated in a lending environment where banks determined borrower risk using formulas hidden in boardrooms. The shift demanded by CBK forces sunlight onto the system.
Transparency will no longer be optional.
Predictability will no longer be negotiable.
And fairness will no longer be a privilege—it becomes a right.
ALSO READ:
Retired teacher wins landmark property dispute as court awards him possession of commercial building
The Bigger Economic Picture
A unified pricing framework strengthens investor confidence, stabilises borrowing trends, tames inflationary lending behaviour, and supports fiscal discipline. It also aligns Kenya with global best practice, where central banks define the boundaries of credit markets while commercial banks operate within them.
This is a positive, necessary, and overdue reform.
The Role of Banks Going Forward
KCB’s public notice is only the first in what will become a wave of similar announcements from other institutions. Compliance is not optional; it is a legal and regulatory requirement. What matters now is execution:
How banks classify risk
How premiums are calculated
How clearly information is disclosed
And how equitably customers are treated across income brackets
The public must remain alert. CBK must enforce firmly. Banks must implement faithfully. And borrowers must demand clarity.
Kenya’s financial sector stands at a moment of clarity—ushered by CBK’s authority, acknowledged by KCB Bank, and soon to be felt by every borrower in the country.
This is the system Kenyans deserve.
By Hillary Muhalya
You can also follow our social media pages on Twitter: Education News KE and Facebook: Education News Newspaper for timely updates.
>>> Click here to stay up-to-date with trending regional stories
>>> Click here to read more informed opinions on the country’s education landscape
