The Kenya Bankers Association (KBA) Chief Executive Officer Raimond Molenje sat down with the Business Daily and discussed a range of topics, including pushing more credit to the private sector amid evolving macroeconomic risks, the lobby’s outlook on the Central Bank Rate (CBR) and recent sector reforms, including the lobby’s reservations on prudential guidelines on systemically important banks.
The President asked that banks scale lending to micro, small and medium enterprises; have you met his request?
We hosted the President in 2024 and began that conversation when total lending to MSMEs was at Sh75 billion, which was not the desired impact.
We made a commitment to double that number to Sh150 billion in 2025. We doubled on our commitment and lent Sh326 billion to the sector last year. Our focus on MSMEs is because the economy is generally run by small, micro, and medium enterprises, and banks have taken a step back in supporting that ecosystem.
Banks need to know their customers better and support them in a way that they even become consultants.
With technology, customers have moved away from the physical bank, and so lenders must look for the customer.
What’s the target for MSME lending in 2026?
Initially, we had set ourselves to lend Sh350 billion at the beginning of the year, but we have already surpassed that by financing Sh246 billion as at the end of June. We think we can lend close to Sh500 billion by the end of the year.
CBK spent a lot of time last year calling out lenders over failure to pass on lower borrowing costs. Do you believe that the industry’s interest rates now align with the regulator’s expectations?
The CBR has been unchanged since February, and I would say what we’ve seen in the last eight months is continued policy transmission. If you look at the average lending rate now and compare it to February, you can see borrowing costs have progressively come down.
This means that even without adjustments by the central bank, commercial banks have continued to adjust their rates. The market reality is that there is usually a lag to policy transmission.
The intention of the central bank was to continue lowering the CBR before the Middle East crisis occurred. I estimate average lending rates would be around 12 percent if that happened from the 14 percent today. This would have more impact on affordability, as a lot more customers would be able to service loans at 12 percent.
Are you worried that a further jump in inflation could trigger rate increases by CBK?
We see the CBK mostly sustaining the current benchmark until next year. However, there is a new challenge presented by the expected heavy rainfall, and we are yet to know the scale and impact that it would have.
The CBK has posed questions on how we are prepared to support our customers through the shock, but our hope is that the benchmark rate can remain unchanged. A hold in the CBR will moreover give banks more time to fully transmit policy and implement the risk-based credit pricing model which came to full effect in March this year.
What has been your view on the draft CBK guidelines on systemically important banks?
I think it’s too early to have this conversation, as banks are currently expected to raise their core capital bases, a matter yet to be fully implemented.
This poses a challenge because we need tier I banks to have enough capital to be able to support and come to the aid of smaller banks if required as we saw a few years back when Cooperative Bank took over Jamii Bora Bank.
The systemic approach is going to be counterproductive to the support required to smaller banks. For me, the timing is not appropriate as it will create more shocks in the market, creating constraints. A shareholder may not earn a return while lending to MSMEs could also be impacted as every extra shilling goes towards building capital.
We need bigger banks to be flexible enough to not only support smaller banks but also lend in the economy. Our brief to the CBK is that the proposal is good, but the timing is wrong.
What’s your industry outlook for the remainder of 2026?
We will still be sustaining our conversation on MSME lending and are looking at the impact we are having, especially on jobs. We also want to revisit our conversation about revising pay-as-you-earn (Paye) rates downwards to give a stimulus and create economic vibrancy.
On the payments side, we are scaling Pesalink to create more affordability with the next phase set on improving user experience. We have also established that not so many customers are aware of Pesalink, which informs our plan for more awareness campaigns, jointly as banks.
The payment systems will require further integration to ensure customers are not concerned whether they are in the Pesalink ecosystem, M-Pesa or Airtel Money.
The experience should be seamless, and only we should worry about what happens on the backend.