Kenya is about to make major changes to the way banks calculate interest on loans. The new framework, called the Revised Risk‑Based Credit Pricing Model (RBCPM), will roll out between September 2025 and February 2026. For everyday borrowers, this means that the reference point for loan pricing will change, making the system more transparent and aligned to market conditions. Here is a simple guide to help you understand what is changing and how it will affect you.
A Unified Reference Rate for New Loans
From 1 September 2025, all new variable‑rate loans in Kenyan shillings will use a single benchmark called the Kenya Shilling Overnight Interbank Average (KESONIA).
Until now, each bank had its own unique internal reference rate, which made it difficult for borrowers to compare loan offers. KESONIA replaces this system with a harmonised market-driven rate that reflects overnight borrowing costs between banks.
Your loan rate will now be calculated as:
Loan interest rate = KESONIA + Bank Premium (K)
Total cost of credit = KESONIA + K + Fees and ChargesThe “K” premium reflects the bank’s operating costs, desired returns, and your personal credit risk profile.
Goodbye to the Old System by November 2025
The current system, where each bank sets its own reference rate, will officially end at midnight on 30 November 2025. Until then, loans taken under the old system will remain valid, but no new variable‑rate loans can be issued without referencing KESONIA.
Migration of Existing Loans by February 2026
By 28 February 2026, all existing variable‑rate loans must be shifted to the new pricing model. This means if you already have a loan with a floating rate in Kenyan shillings, its pricing will be recalculated using:
KESONIA (compounded daily in arrears) + K + Fees and ChargesThis six‑month transition period (September 2025 to February 2026) gives banks time to adjust systems and inform customers.
Who Is Not Affected?
If you have a fixed‑rate loan or a foreign currency loan, these changes will not apply to you. Your repayment terms remain the same.
What Does This Mean for Borrowers?
Here are the key takeaways:
- More Transparency: Banks will be required to publish monthly breakdowns of KESONIA, the premium “K”, and all fees. This information will also be available on the Total Cost of Credit (TCC) website.
- Fairer Pricing: Borrowers with good credit histories may benefit from lower rates, while higher-risk borrowers may face higher premiums.
- Closer Link to Monetary Policy: Since KESONIA is influenced by central bank actions, loan rates will better reflect changes in economic conditions.
- No Change for Fixed or Foreign Currency Loans: If your loan falls into these categories, you are not affected.
Timeline at a Glance
- 1 September 2025: New variable‑rate loans must use KESONIA.
- 30 November 2025: The old system ends.
- 28 February 2026: All existing variable‑rate loans are migrated to the new system.
The overhaul of Kenya’s loan pricing system is designed to create fairness, transparency, and better alignment with market conditions. For borrowers, this is an opportunity to make more informed choices when taking loans. Always check the published breakdowns, compare offers across banks, and pay attention to how your credit profile affects the premium you are charged.
