Banks and Bank Loans in Kenya

This article is written by Bonface Kamau, who is going to be writing on banking right here on Like Chapaa. Is there anything that you’d like to know about banking in Kenya? Bonface is the man, just contact us with your questions.

Money makes the world go round. Based on this principle, banks have seized the opportunity to bridge the gap between the financially surplus and the financially deficit through loans and overdrafts (bank credits). Since banks are actually businesses with a profit motive, they charge interest on the credit, calculated on a compound interest basis.

This interest that banks charge must cover their bad debts and non-performing loans – referred to as the interest exposure – which is calculated by professionals before banks come up with a standard interest rate.

Commercial banks’ having defied a directive to reduce their interest rates by the Central Bank of Kenya has led to customers being offered loans at very uncompetitive terms. The only banks offering competitive interest rates on their loans are K.C.B and Southern Credit Bank (which unfortunately operates in Nairobi only). However, the Central Bank of Kenya issues directive to banks to subsidise their interest rates on loans meant for nation building like loans to start a business and currently to farmers which is at about 15% p.a as compared to 17-21% offered on normal loan terms.

It is worth noting the tremendous growth in our non-banking financial institutions which offer loans at a much lower interest rate. However, any transaction entered into with these institutions such as a loan agreement, should be weighed heavily as this non-banking financial institutions are not regulated and/or scrutinised thoroughly as banks. This leads to questions being raised about their integrity and accountability. One may consider the youth and women’s fund if you want do not meet the requirements asked by the banks.

This should not discourage you, however. If you have a viable idea and a burning desire to transform that idea into a lucrative business, then go for financing. Business owners and entrepreneurs are known as risk takers – just bite the bullet and go for what you think works for you.

As we review the merits of bank loans, acquiring one should not lead one from a bad situation to a worse one. Ask your banker all the relevant questions not forgetting to inquire about any hidden charges. Let the banking hall be the birth place for success.

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  1. I have never really understood the concept of borrowing from banks. I know it is a necessary evil for some but those interest rates are so punitive!

    My dad bought his first house with those mortgage facilities, I am telling you we have never been poorer in our lives.

    I see people taking mortgages everyday and I always feel like advising them not to and to consider borrowing from elsewhere. Its tricky coz I am paid to make sure those mortgages are registered.

  2. Hi i just want to know where i can get a loan against my title deed.i dont have a job and i want start up for my business.

  3. most “bankers” have sales targets and they would do anything to close the sale. Be very careful where you get advice from it could ruin you. To manage 17%pa the business must be doing very well to pay rent, salaries, Elec, taxes etc plus the 17%.
    I personally think that one should have some money and only go to the bank for the lesser portion.

  4. before taking the loan, you have to count the costs in terms of charges to you especially on interest.

  5. I have an un-serviced pending loan after losing my job. what can i do?

  6. dianah cherop ngaina says:

    iam in abroad and i want i loan in kenya of 1 million BUT I CAN PAY 10000 PAR MONTH 0033609707267 OR 0033982457542 IS IT POSSIBLE DIANAH

  7. GILBERT BII says:

    can i get loan for schooling am in mt kenya university

  8. you can get in condition that you have all the qualifications

  9. Reroroly says:

    How much help r we to gettin here n is there limitations!

  10. Tobias Obura says:


    Could you also comment about the role of a well defined business plan in the loan process. I think this will add value. It is an area very close to my heart too.


  11. Sarah Omanya says:

    Hi Dianah,
    I am in a similar situation. Did you suceed securing a loan?

  12. Martin Mwaniki Kihuti says:

    Hi my name is Martin Mwaniki require a loan of 100000 with a gurantee of my title deed and salary

    call 0700347419

  13. Florence wambui says:

    Hi, I applied a loan at equity bank, after paying for four years, I found that they had increased my balance by almost 200,000..they said that interest rates hiked from 2011 to 2013 so they adjusted my it supposed to be like that because I find it unfair? Where can I go to get clarification apart from them?

  14. Hi, how can I get a loan and am not employed but I have a tittle deed

  15. francis ikonya says:

    anyone seeking a loan on logbook title deed and household goods call me 0775010227

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