The Co-operative Bank has scored another first in Kenya’s banking sector after slashing interest rates charged on loans.
In the move announced today, Co-op Bank announced that borrowers who exhibit good repayment trends will now access personal loans and asset financing at lower interest rates of 13 per cent per year, down from the previous 14 per cent per annum rate charge effective April 1 2023.
This rather ‘contrarian approach’ bucks the industry trend where majority of the lenders are revising lending rates significantly upwards, especially in light of the recent upward adjustment of CBR by a huge 75 basis points to 9.5 per cent.
“This reduction of the lending rate is our response to the good loan repayment record and reduced default risk that the target check-off scheme loans have recorded over time,” said Co-op Bank. “It is a deserved reward for customers who have maintained a consistently good credit record.”
Among the main beneficiaries of the new lower rates include key corporate and institutional employers including the Kenya Defence Forces (KDF) and other armed services, the Kenya Police Service, the Teachers Service Commission (TSC), Government Ministries, the National Assembly, key state corporations such as Kenya Revenue Authority (KRA), KenGen among others.
Customers looking to take advantage of this low loan pricing rate for personal loans and asset financing have been encouraged to apply at any Co-op Bank Branch.
Co-op Bank retains a credit pricing model that is dynamic and tuned to respond effectively to credit performance. “We are working to extend this benefit beyond the current target customer segments namely Personal Loans and Asset Finance, to include all borrowers with good credit history,” said Co-op Bank.
Interestingly, the lowering, of these low charges comes hot on the heels of a move by Co-op Bank to offer home loans at reduced balance terms and interest rate of just 9.9 per cent.
This mortgage plan aims to provide affordable housing to persons who earn not more than Sh. 150,000 per month. This plan is 3 per cent points cheaper than the average mortgage rate of 12.9 per cent which is estimated by the Central Bank of Kenya to be the average mortgage rate in Kenya.