Following a move by the Central Bank of Kenya to phase out the Risk-Based Credit Pricing model that has been in effect since 2019, a new era of lending is on the horizon.
The revised Risk-Based Credit Pricing Model (RBCPM), which took effect in September 2025, promises greater transparency and a more direct link between a borrower’s risk profile and their loan’s cost.
In line with this sector-wide shift, KCB Bank Kenya has announced it will adopt the new framework beginning December 1, 2025. From this date, all new local currency variable-rate loans from the bank will be priced by combining a common reference rate with a personalized risk-based premium unique to each customer.
This individual premium, often denoted as “K,” reflects the borrower’s specific risk level, the lender’s operational costs, and a margin for shareholders, creating a more tailored and equitable pricing structure.
For existing customers with variable-rate loans, there will be no immediate changes; their current loan terms will remain intact until the conclusion of the official transition period set by the banking regulator, which concludes on February 28, 2026. This six-month window allows financial institutions and their clients to make the necessary adjustments.
To guarantee full transparency, banks will be required to publicly disclose their weighted average lending rates and premiums, providing borrowers with clear benchmarks for comparison.
As a result, KCB has pledged to provide borrowers with full disclosure of all relevant fees, charges, and the complete cost of credit before any agreement is finalized.
