Category: Business Daily

Green gram and cowpeas exports grew sharply in the quarter to September 2025, bucking a trend of slumps in the shipment of Kenya’s main food crops to lucrative markets due to a policy priority to service domestic consumers.

Analysis of data by the Agriculture and Food Authority (AFA) showed that shipments of green grams, cowpeas, and beans posted explosive growth in the quarter to September, with cowpea exports rising over 724 percent, driven by high demand from Asia and the Middle East, handing a boost to producers servicing the well-paying markets abroad.

Contrastingly, exports of major cereals like rice and maize remained minimal amid a policy priority to satisfy local consumption in the wake of tight production volumes locally.

Kenya’s rice exports slumped 99 percent to 12.23 tonnes in the quarter to September 2025, compared to 1,561.69 tonnes in a similar period of 2024, indicating a major shift of available supplies to the domestic market.

Maize and wheat exports showed significant percentage growth from a very small base (increasing to 77.74 tonnes and 223 tonnes, respectively, although their absolute volumes remained negligible, continuing the trend of prioritising local consumption.

‘On the other hand, the pulse sector demonstrated growth, driving Kenya’s overall export performance. Green gram exports more than doubled, surging from 5,519.55 tonnes to 13,241.49 tonnes, with a particularly massive shipment in July 2025,’ the regulator said.

Cowpea exports saw an increase of over 724 percent, jumping from 645 tonnes to 5,317.41 tonnes, the quarterly data showed, while bean exports also grew by 14 percent to 8,059.55 tonnes.

The only pulse that recorded a reduction was pigeon peas, which fell by 16 percent to 17,453.21 tonnes, though it remained the second-highest export crop by volume. Irish potato exports fell sharply by 95 percent to 14.94 tonnes.

‘In general, the period was marked by a strategic pivot where cereal exports were heavily constrained, while pulses, particularly green grams and cowpeas, flourished in the international market,’ AFA said.

‘Kenya’s agricultural exports are highly concentrated in specific, strategic international markets. The data reveals a clear reliance on a few key destinations for each commodity,’ it added.

In the quarter to September, the export of pulses was mainly directed toward Asian markets. India was the near-total destination for cowpeas (99.95 percent) and the dominant buyer of pigeon peas (92.43 percent).

Similarly, the bean market was led by India (40.03 percent) and Pakistan (32.77 percent). Green grams found their primary markets in Thailand (37.98 percent), the United Arab Emirates (UAE) (20.60 percent), and Indonesia (20.28 percent).

Thailand bought 5,029 tonnes of green gram from Kenya valued Sh554.79 million, while the UAE purchased 2,728 tonnes of the commodity valued Sh282.45million. Indonesia was also a big buyer of Kenya’s green grams in the quarter to September 2025, with 2,685tonnes valued Sh295.3 million bought.

East African Breweries Limited (EABL) chief financial officer Risper Ohaga will leave her position at the end of June, ending a six-year tenure during which she played a central role in strengthening the brewer’s financial position and governance.

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The exit comes ahead of EABL’s parent company Diageo selling its 65 percent stake to Japan’s Asahi Group, which will control the beer maker going forward.

In a staff announcement on Tuesday, EABL Group Chief Executive Officer Jane Karuku and Group Human Resources Director Jackie Chimhanzi said Ms Ohaga will leave the company to pursue interests in line with her career aspirations.

She will remain in office until June 30, to allow for an orderly transition, with her successor to be announced later.

Ms Ohaga joined EABL in February 2020 from Absa Group, then known as Barclays, where she had worked for more than a decade in senior finance and audit roles across Africa.

Her appointment coincided with the onset of the Covid-19 pandemic, a period that placed unprecedented strain on corporate balance sheets and funding.

‘She has led in delivering the 2021 and 2025 medium-term notes, saving the business significant amounts in interest costs, demonstrating her financial acuity and bold decision-making,’ the company said in a statement.

The statement added that Ms Ohaga also placed strong emphasis on talent development, with members of the EABL finance team winning Diageo global finance awards a record three times in the past four years.

At EABL, she is credited with optimising the company’s balance sheet and securing funding to fully support its strategy while tightly managing costs. She led the issuance of the brewer’s 2021 and 2025 medium-term notes, transactions that the company says delivered significant savings in interest costs and strengthened its funding profile.

Under her leadership, EABL said, the company reinforced its financial controls and governance structures, enhanced investor relations, and delivered strong results in a challenging operating environment.

‘A number of Finance staff have taken up international assignments both globally and within EABL, with secondments to senior roles in Japan, Ghana, India, Ireland, and Singapore, among others. She believes in nurturing and developing talent as evidenced by the number of finance staff promoted and/or taking on new challenges under her leadership.’

Before joining EABL, Ms Ohaga served as Chief Financial Officer for Absa’s Zambian unit between November 2015 and February 2020. She previously held the role of Managing Director for Barclays Internal Audit, Africa Retail and Business Banking, where she was accountable for audit delivery across 13 African countries.

Earlier, she was Director, Africa, at Barclays Internal Audit, overseeing retail and business banking audits in 12 countries, including Kenya, South Africa, Uganda, Tanzania, Ghana, and Egypt. Her career at Barclays began as Regional Director for Internal Audit for East and West Africa.

Ms Ohaga earlier worked at KPMG, where she spent more than nine years as a senior manager between 1999 and 2008.

Kenya cut its spending on pharmaceutical imports by 22 percent during the first nine months of 2025, as the country shifted toward lower-cost procurement strategies.

Between January and September 2025, the country spent Sh62.1 billion on medicinal and pharmaceutical products, down from Sh79.6 billion over the same period in 2024-a reduction of Sh17.5 billion, according to the Kenya National Bureau of Statistics (KNBS).

Medicinal and pharmaceutical products refer to finished dosage forms of medications and related healthcare products that are ready for distribution.

They include prescription drugs that require a doctor’s authorisation, over-the-counter medicines such as painkillers and cough syrups, vaccines, and both generic and branded medicines, medical supplies like syringes and diagnostic test kits.

The drop in spending came even as the volume of pharmaceutical imports rose slightly by 1.2 percent, from 29,324.5 tonnes to 29,664.7 tonnes.

This means Kenya is paying about 23 percent less per tonne of medicines than it did a year earlier, pointing to a shift to cheaper types of medicines being imported.

The trend was most evident in the third quarter of 2025, when Kenya spent just Sh19.6 billion on pharmaceutical imports, the lowest quarterly figure on record and a 32.1 percent decline from the Sh28.9 billion spent in the third quarter of 2024.

Over the same period, import volumes jumped to 12,239.7 tonnes, the highest quarterly level and 21.6 percent more than in the corresponding quarter a year earlier.

The lower import bill could be linked to a shift toward generic medicines rather than more expensive branded drugs, as well as improved pricing through bulk-purchase agreements with international suppliers. Government efforts to contain healthcare costs through initiatives such as the Universal Health Coverage (UHC) may also be shaping procurement decisions.

The pattern observed during the first nine months of 2025 was projected in late 2024. In the fourth quarter of 2024, pharmaceutical imports fell sharply to Sh20.3 billion -a 29.8 percent drop from the third-quarter peak, marking a turning point that was carried into 2025 and established a trend of reduced spending.

Despite its heavy reliance on imports, Kenya has established itself as the third-largest pharmaceutical exporter in Africa and the leading exporter within the Common Market for Eastern and Southern Africa (Comesa) region. Exports of medicinal and pharmaceutical products reached Sh19.2 billion in 2024 and stood at Sh12.9 billion in the nine months to September 2025.

Kenya’s main export destinations include Uganda, Ethiopia, Malawi and Rwanda.

However, about 70 percent of medicines consumed domestically are still imported, with local manufacturers supplying only around 30 percent of national pharmaceutical demand.

‘With over 30 pharmaceutical manufacturing plants, Kenya’s pharmaceutical industry is the largest in the Common Market for the Eastern and Southern Africa region. However, insufficient drugs are manufactured in Kenya to meet domestic needs. As a result, approximately 70 percent of locally used drugs are imported,’ the 2024 Kenya Pharmaceutical Industry diagnostic report says.

The government has set a target to increase local production by at least 60 percent by 2026.

‘Our priority is to advance technology transfer, industrial collaboration, and sustainable systems strengthening, fully aligned with the President’s role as African Union Champion for Local Manufacturing -to reduce dependency and enhance Africa’s capacity to produce essential health commodities,’ Health Cabinet Secretary Aden Duale said during an official visit in India last month.

The Kenyan government’s motor vehicle leasing programme has created clear winners across manufacturing, security and public finance -while exposing pressure points around delivery timelines, financial costs and supplier concentration.

Since inception in 2013, the programme has seen 3,548 vehicles leased, anchoring demand for locally assembled vehicles and reshaping how the state procures and manages its transport fleet.

The biggest beneficiaries have been local vehicle assemblers and suppliers, with the programme supporting 1,813 full-time jobs and the local assembly of more than 10,000 vehicles.

Local content in vehicle assembly has risen sharply, from nine percent to 38 percent, reflecting increased sourcing of parts and services domestically.

Parts and accessory manufacturers have secured business estimated at Sh400 million, while the expanded fleet has created a Sh2.2 billion annual market for oil and petroleum products.

The Treasury has also emerged as a net winner. Programme data shows Sh2.69 billion in government revenue generated alongside Sh1.6 billion in tax remittances, helping offset some of the programme’s costs.

By shifting from outright purchases to leasing, the government has also reduced upfront capital expenditure, smoothing cash flows even as fleet size expanded.

The expanded vehicle fleet has coincided with measurable improvements in security outcomes, particularly within the police service.

Kenya recorded a crime index of 196 incidents per 100,000 people over the past eight years, while incidents where police failed to respond to emergencies fell from 49 percent in 2012 to 22.1 per cent in 2024.

Police surveillance coverage increased by 25.4 percent, and response times to distress calls were cut by 50 percent between 2012 and 2022, gains officials attribute partly to improved fleet availability.

One of the biggest corporate beneficiaries has been Isuzu East Africa, which is set to supply 591 vehicles in the latest instalment of the National Police Service (NPS) leasing programme.

Isuzu last week delivered the first 95 vehicles under the contract in which other dealers are also participating.

The contract reinforces Isuzu’s dominant position in Kenya’s commercial vehicle market and underscores the importance of state-backed demand in sustaining local assembly operations.

As the government continues to rely on leasing for official transport, the programme is increasingly being judged not just on fleet numbers, but on its ability to support local manufacturing, improve service delivery and deliver value for taxpayers.

Higher share prices at the Nairobi Securities Exchange (NSE) have cut the dividend yields for a majority of companies to single digits, forcing investors to consider alternative performance metrics such as profit ratios when making their stock picks in the market.

The bourse has seen its valuation go up by Sh1 trillion or 49.3 percent to Sh3.04 trillion over the last 12 months, mainly on double-digit percentage gains among large blue chip stocks that are also the more consistent dividend payers in the market.

Before the bull run of the last two years, dividend paying stocks were offering investors high yields that competed favourably with returns on government paper, including tax free infrastructure bonds.

The yields are calculated on the dividend per share as a percentage of share price, meaning they tend to fall when share prices rally, unless the companies raise their payout at a similar pace to their share prices.

Investors in the stock market earn a return on their capital when share prices go up, better known as capital gains, or through dividend payouts.

Dividend yields are, however, only one of the several metrics that an investor can use to identify investable stocks. For those chasing capital gains, a stock’s trading multiple is an indicator of whether it is cheap or expensive, which determines the potential to gain or lose value in future.

‘Dividends had been a key driver of investor trading activity on the NSE especially in the 2018 – 2023 period given that it was on a long bear (downward trending) run,’ said analysts at Sterling Capital in an equities note published on Wednesday.

‘However, investors are increasingly gravitating towards valuing stocks through earnings multiples (price to earnings and price to book) as the NSE bull (upward trending) market has gained steam.’

Out of the 31 companies that paid a dividend for the 2024 financial year, only four have a trailing dividend yield of more than 10 percent -Standard Chartered Bank Kenya (14.7 percent), BAT Kenya (10.64 percent), Kapchorua Tea (10.59 percent) and Stanbic Holdings (10.48 percent).

One year ago, 11 companies were returning above 10 percent, led by cross-listed Ugandan power utility Umeme at 15.8 percent and KenGen at 15.2 percent. Yields for 11 companies have fallen below five percent, including large blue-chip firms Safaricom (4.1 percent), EABL (3.14 percent) and KCB Group (4.48 percent).

These large companies are the top dividend payers in the market, making them a favoured investment option for institutional and foreign investors who buy stocks with a longer term outlook, as opposed to speculators who take positions solely to benefit from short term share price increases.

A company’s ability to pay and increase dividends is also seen as a strong indicator of good financial health and stability, and when that is combined with a high yield as a result of low share price, it can point to an undervalued company.

Majority of companies are also offering investors an annual return that is well below what they would be getting from short term government securities over the same period.

The 91-day and 364-day Treasury bills are currently offering investors pre-tax interest returns of 7.7 percent and 9.2 percent respectively, having halved from highs of 16.9 percent in September 2024. Treasury bonds are meanwhile paying annual returns or coupons of between 12 and 14 percent.

The Kenya Association of Travel Agents (KATA) has joined global industry bodies in opposing a decision by the International Air Transport Association (IATA) to impose standardised Billing and Settlement Plan (BSP) remittance periods across all markets.

IATA, through a recent member vote, adopted a resolution to introduce uniform global remittance terms by mid-2026, eliminating the long-standing flexibility for local market determination under joint governance mechanisms between airlines and agents.

The BSP, which presently covers more than 207 countries and over 400 airlines, is used to track and manage air ticket sales and the associated financial transactions. It facilitates and simplifies financial transactions between IATA-accredited Passenger Sales Agents and BSP airlines, while also helping improve financial control and efficiency.

IATA said the changes are intended to harmonise settlement processes across markets and strengthen the efficiency and security of airline revenue collection under the BSP framework.

KATA, however, warned that the move risks destabilising Kenya’s travel trade, raising ticket prices and pushing local agencies out of business.

The association argues that the decision dismantles long-standing locally agreed arrangements that reflect domestic financial systems, payment behaviour and commercial realities in markets such as Kenya.

‘Our local market is very unique. Kenya is still largely a credit market, with a bigger portion of our travel comprising corporate and government travel. For both corporate and government travel, you are never paid upfront or immediately. We still issue tickets on credit and then get paid later,’ says KATA chief executive officer Nicanor Sabula.

Remitting funds

According to Mr Sabula, delayed payments are a structural feature of the Kenyan market, with settlement periods often stretching far beyond a month.

To accommodate these realities, Kenya’s BSP remittance cycles have historically been determined locally through the Agency Programme Joint Council (APJC), a platform that brings together airlines and travel agents to jointly agree on settlement terms.

‘Currently, we remit twice a month.’ Mr Sabula says.

Under the BSP, IATA-accredited agents centrally remit funds to IATA, which then distributes them to participating airlines according to their share of ticket sales.

Critics said shortening and strictly standardising remittance periods would require agents to pre-finance customer payments to a greater extent and advance money to airlines before (corporate) clients have paid in full.

KATA said the move towards global standardisation gives IATA the power to unilaterally alter settlement cycles, including shifting markets such as Kenya to weekly remittance, a model already applied in parts of Europe and other Western markets.

‘In those markets, they don’t have such a huge credit market for travel. People pay via credit cards or cash, so it’s easier to turn around the money,’ Mr Sabula said. ‘Those are local conditions that need to be factored in.’

Mr Sabula adds that forcing agents to settle weekly would significantly increase their reliance on bank financing. ‘If the travel agent has to cover that credit, it means they must go to banks for overdraft facilities, and that is costly. It makes the cost of doing business high,’ he says.

KATA maintains that the current remittance framework, although sometimes tight, has supported the sustainability of agencies by aligning settlement timelines with corporate and government payment cycles.

‘Even though it’s a bit pressed, remitting twice a month means we are able to access credit within that period and settle, knowing that most corporates and government pay monthly. The credit taken from banks is for a shorter period, so it’s easier to cover,’ Mr Sabula says.

KATA fears

He says a shift to weekly remittance would raise capital requirements across the industry. ‘This will challenge both big and small agencies because the capital demand will be much higher. The risk is that we are going to see a lot of travel agents pushed out of business.’

Beyond business closures, KATA fears the policy could shrink Kenya’s travel market by tilting competition in favour of large international travel sellers with access to cheaper offshore capital.

‘We are likely to lose business to international travel sellers who can access capital elsewhere and then service the local market. They will be able to price their tickets lower than our local players, squeezing Kenyan agents out of the ticket market,’ Mr Sabula says.

KATA also warned of a likely rise in ticket prices for consumers as higher financing costs are passed down the value chain.

‘If the cost of accessing credit goes up, somebody has to cover that cost, and that is likely to be passed on to the consumer,’ Mr Sabula says.

On governance, KATA criticised what it described as inadequate consultation during the IATA mail-vote process.

‘We have not seen the engagement of the travel agency community, which is unacceptable. IATA regulations call for a participatory approach where agents and airlines sit and agree. To unilaterally make these changes completely skews the relationship. IATA is almost taking a monopoly position on a very significant decision that could affect the market,’ Mr Sabula says.

The association has aligned itself with concerns raised by the United Federation of Travel Agents’ Associations (UFTAA), calling for a reconsideration of the policy and a return to consultative governance.

‘We are disappointed by IATA’s unilateral decision to change a system that has worked well and served the Kenyan market effectively for many years. Any global intervention that overlooks local market conditions risks destabilising the travel distribution ecosystem,’ says KATA chairman Dr Joseph Kithitu.

International Finance Corporation (IFC) plans to make an equity investment of up to $30 million (Sh3.87 billion) in a pan-African private equity fund focused on small and medium sized enterprises in markets such as Kenya.

The amount will be invested in Adenia Entrepreneurial Fund I (AEF I), which is headquartered in Mauritius and has five regional offices covering Kenya, Madagascar, Morocco, Nigeria and South Africa.

IFC said it is also ready to co-invest with the fund to the tune of $20 million (Sh2.58 billion) where the asset manager will be in charge of running the portfolio.

The commitments will offer a boost to the fund, which is targeting to raise between $150 million (Sh19.35 billion and $180 million (Sh23.2 billion).

‘IFC will play a catalytic role as an anchor investor for AEF I, helping the fund complete its first close. The co-investment envelope will also help the fund attract additional follow-on equity capital,’ said IFC in latest investment disclosures.

In October last year, Adenia announced it was going to acquire insurance broker Minet as part of a pan-African deal that also expands its Kenyan portfolio, which includes supermarket chain QuickMart Limited, Red Land Roses and Africa Biosystems Limited.

The fund targets growth equity investments in 10 to 12 small-cap companies with amounts ranging from $10 million (Sh1.29 billion) to $20 million (Sh2.58 billion). Adenia has been in existence for over 22 years, raising a cumulative $950 million (Sh122.55 billion) over this period.

IFC says the fund is expected to increase access to private equity capital and value-creation for small-cap companies in Africa.

Adenia will need to attract additional investments by riding on IFC investment giving comfort to global investors looking to participate in the African-focussed PE market.

‘Beyond the project, the fund’s success will also showcase the viability of the small-cap regional private equity model as an opportunity for international investors to re-engage with the African PE market. This will, in turn, encourage other fund managers in the region to raise new or follow-on funds of greater scale and catalyze new PE activity across the region,’ said IFC in latest disclosures.

Kenya has lauded a decision by the US House of Representatives to pass a Bill to extend the Africa Growth and Opportunity Act (Agoa) programme, which provides preferential access to the key market for goods from select African nations.

The US House of Representatives voted on Monday to extend Agoa for three years, marking a relief for Kenyan exporters to the US who had been hit by tariffs as much as 42 percent from October 1, 2025, and thousands of jobs for firms at export processing zones (EPZs) were at risk.

Investments, Trade, and Industry Cabinet Secretary Lee Kinyanjui said that the decision renews certainty in the EPZ sector.

‘The uncertainty that had engulfed the sector will now give way to renewed confidence and expansion. We aim to grow exports of additional products under the Agoa framework beyond textiles, ensuring that Kenya fully leverages this opportunity to create jobs and generate wealth,’ the CS said.

In Kenya, the textile and apparel industries operating within the EPZs employ over 80,000 people directly and an additional 250,000 indirectly.

The Agoa pact allows the entry of more than 6,000 products, such as food and beverages, wood, plastics, and rubber, to the US market from sub-Saharan Africa. But Kenya has largely tapped the apparel line, alongside small quantities of macadamia nuts.

Agoa extension would offer relief to Kenyan exporters who have been relying on the pact for more than two decades, building an industry that exported Sh60.5 billion goods in 2024 alone.

Over the past five years, firms exported 518.3 million pieces of textiles and apparel to the US under Agoa, with the number of companies operating under the framework increasing from 28 in 2020 to 40 in 2024.

Players, including manufacturers who have benefitted from the programme and the government, have been lobbying for its extension since early last year, with delegations dispatched to the US in recent months.

The manufacturers said that shipments to the US had been slapped with full duties ranging from 15 to 42 percent since the lapse of Agoa last September.

‘Currently, manufacturers are paying a full duty range of 15 to 42 percent, plus a 10 percent reciprocal tariff. This is a high cost that would be waived through the negotiated agreement or Agoa extension,’ Tobias Alando, the chief executive officer of the Kenya Association of Manufacturers (KAM) told Business Daily in an earlier interview.

The Kenya Private Sector Alliance indicated that the extension of Agoa provides an opportunity to grow apparel exports from nearly $600 million (about Sh77.40 billion) to $2 billion (Sh258 billion), potentially creating 200,000 new jobs through backward integration in textiles, yarn, and cotton.

In a country where public service delivery is already strained by insufficient resources, inefficiency and crumbling infrastructure, one would expect the little available funding to be used prudently.

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Unfortunately, that is not the case. Instead, Kenya’s public bodies appear trapped in a legal quagmire, expending vast sums fighting one another over disputes that could be resolved with common sense and far fewer resources.

A case that has recently drawn public attention involves Nairobi County, which faces the prospect of paying a staggering Sh1.3 billion in legal fees to a single law firm.

This is not an isolated incident. Some of the county’s largest outstanding bills relate to legal fees, with Nairobi owing law firms just over Sh21 billion – about 11 per cent of its total pending bills portfolio.

Of this amount, four firms alone are owed more than Sh6 billion, representing nearly 29 per cent of the county’s legal pending bills. The Auditor-General’s report for the year ending June 2024 paints an even grimmer picture. It found that in many counties there is no evidence that the Advocates Remuneration Order of 2014 is applied when determining legal fees.

Lawyers earning hundreds of millions from county governments are often selected from pre-qualified lists, with little or no assessment of legal costs or internal legal capacity.

Nairobi, in particular, appears to have become a cash cow for lawyers. The public, meanwhile, is left to foot the bill. This trend is not confined to Nairobi.

Across the country, counties are grappling with mounting legal costs that threaten to undermine public service delivery. With some cases dragging on for years, these protracted disputes are not only financially crippling but also emblematic of how wasteful use of public resources continues to stall development.

When governments engage in endless litigation, often over trivial matters, they keep law firms flush with cash while shifting focus away from citizens’ needs.

The cost is not merely financial. Each legal showdown delays infrastructure projects, disrupts public services and creates uncertainty that stifles investment and innovation. It is also telling that many of those driving these disputes are highly paid public officials who appear more interested in personal gain than amicable resolution.

As a nation, we must ask whether it is truly necessary for public entities to spend billions fighting one another in court. Ultimately, this is not just about wasted funds but a failure of leadership.

For Kenya’s future, there must be a decisive shift away from courtroom follies and towards responsible stewardship of public resources.

Easier access to the interbank market by the Central Bank of Kenya (CBK) has greatly helped stabilise the liquidity of foreign exchange in the local market and supported a stable exchange rate, as witnessed over the past 18 months, a top commercial bank official has said.

The Kenyan shilling has stabilised in the range of 128 to 129 units to the US dollar for more than 16 months now.

Absa Bank Kenya’s Director in charge of Global Markets, Stella Mambo, said that the CBK’s interventions in reforming the interbank market, starting mid-2023, have significantly aided in deepening liquidity in the market as well as boosting the flow of funds between parties.

The CBK on August 9, 2023, introduced an interbank interest rate corridor anchored on the benchmark rate as part of efforts to ensure borrowers benefited from cuts in its indicative lending rate.

‘The other intervention, besides the corridor introduction, was in terms of the notional sizes that we used to trade. Previously, the minimum ticket size was north of $500,000. That got reduced to $250,000, and that allowed more participants into the interbank market, which created liquidity and flow of funds through the system,’ Ms Mambo said.

Banks may borrow money from other banks in the inter-bank market to ensure that they have enough liquidity for their immediate needs, or lend money when they have excess cash on hand. The interbank lending system is short-term, typically overnight, and rarely more than a week.

A lower interbank lending rate means that banks have relatively lower costs in managing their liquidity and meeting regulatory requirements. The interbank lending rate also has an influence on the cost of borrowing for consumers, as it determines part of a lender’s funding expenses.

The CBK has implemented substantial reforms in the interbank market, primarily through a transition from the risk-based loan pricing model to the Kenya Shilling Overnight Interbank Average (Kesonia)-a benchmark rate that reflects the average interest rate at which banks lend and borrow unsecured overnight funds in local currency.

The new model uses the interbank rate as the common reference rate for determining lending rates to all customers. Banks are allowed to load a premium (K) on the reference rate, now referred to as Kesonia. The total lending rate is now calculated as Kesonia + Premium (‘K’), where the premium reflects the borrower’s risk profile, bank costs, and shareholder returns.

Ms Mambo further holds that a move by the CBK to create a window for shorter tenors for players scouting for local currency funding to come to market has also provided a major boost for liquidity in the foreign exchange market.

‘The other intervention was around looking at scenarios where, if counterparties are coming to the market to borrow local currency funding, they had to sell dollars, and to support that, there had to be limits prescribed. What happened in that space is that non-residents were now allowed to come to market for tenors of even less than six months, whereas before it had to be for a year, and this has created flexibility and the market is quite efficient,” she said.

The official said adoption of the Global Foreign Exchange Code in March 2023 is also said to have played a crucial role in the stabilisation of the foreign exchange market.

The Global Code is maintained by the Global Foreign Exchange Committee (GFXC) as a set of guidelines to ensure an efficient wholesale foreign exchange market.

The GFXC was established in May 2017 as a forum to bring together central banks and private sector participants to promote collaboration and communication on forex matters, and exchange views on trends and developments.

‘Three years ago, there were two big challenges with the foreign exchange market. The first was price discovery, and the second was liquidity. The first intervention was the adoption of the Global Foreign Exchange Code in March 2023, of which Kenya was initially not part.

This helped in bringing market integrity and laying down standards on how foreign exchange transactions take place, especially around governance, risk management, and transparency,” said Ms Mambo.