In today’s economy, where the pace of business is a bit slower, most people find themselves at the point of seeking debt. Whether it is a personal loan or for your business, you can bear me witness that borrowing in Kenya is becoming costly. From the complex loan application process to the high interest rates. The system appears to intentionally frustrate you, the borrower. The truth is that with the current domestic borrowing perpetuated by our government, banks find it much easier and simpler to make money from bonds and bills rather than loan you and me.
Let us take a look at the data for a minute. The current domestic debt sits at around 54.7% of our national debt of 12.06 trillion. The result is roughly 6.6 trillion shillings borrowed internally. Of this amount, 45.1% is from banking institutions, which has made it quite hard for the common Kenyan to get a bank loan. However, there are some banking institutions that offer quite pocket-friendly loans, and that is the subject of this blog.
I will be providing a breakdown of the cost of getting a loan from each bank as well as tips on how you can make lenders trust you more. In a country where credit scores are not that mainstreamed, there are a few things you could do for yourself or your business to position it as a worthy borrower.
Bank Loan interest Rates in Kenya
For this example, we will be using a loan of Ksh. 100,000. We will get to see the interest you will be charged for it, as well as the total cost for borrowing the amount. By the end of it all, I want you to be in a position to know which bank works for you and which doesn’t. One crucial thing you should also know about your bank, despite the interest rates they charge, is their hidden fees and additional charges. As you will see, some banks advertise low interest rates, but they charge more on fees, making the loan costly.
| Bank | Interest Rate | Total borrowing Cost |
| Sidian | 16.22% | 31,100 |
| Guardian Bank | 13.57% | 28,050 |
| Access | 19.98% | 24,780 |
| Middle East Bank | 19.87% | 23,980 |
| Equity Bank | 14.89% | 23,785 |
| Paramount Bank | 14.47% | 15,380 |
| StanChart | 13.35% | 15,000 |
| ABC | 15.90% | 14,750 |
| HFC | 18.99% | 13,000 |
| Habib bank AG Zurich | 14.55% | 12,750 |
Types of Banks Loans
1. Personal Loan
A personal loan is money lent to an individual to cover their expenses. Whether we are talking of paying rent, school fees, or servicing a car. They help people fill the gap between their expenses and their current income. For instance, if you have monthly expenses of Ksh. 50,000 and your income for that month comes to Ksh. 30,000, then you need an extra Ksh. 20,000. This is where personal loans come in.
They can either be secured, meaning you place an asset such as a logbook as collateral. Alternatively, a personal loan can be unsecured, similar to most loans offered by apps like Tala, Zenka, and Fuliza. After taking a personal loan out, you are required to make monthly payments with interest until the loan is completed.
2. Business Loan
Business loans are provided by banks, SACCOs, or any credible finance establishment. It is money lent to a business to finance either expansions, cash flow shortfalls, or stock boosts. Often, it is secured based on lender requirements. Interest rates depend on business size and how well they keep financial records.
If you have a big hardware business, for example, but lack any formal way of accounting, then it is hard for you to secure a business loan. In contrast, a smaller business with accurate and up-to-date financial records can easily secure a loan at an even lower interest rate.
3. Mortgage Loan
A mortgage is a loan provided to the mortgagor by either a bank or SACCO to purchase property. In Kenya, mortgages are not that common, as many Kenyans work informally and hence lack predictable cash flows. Moreover, the interest rates charged on mortgages have been keeping people away from them because you end up paying so much for the property that it makes more sense to rent.
4. Asset Finance Loan
Asset financing typically covers movable assets like cars, machinery, or motorcycles. In Kenya, it is offered by a lot of banks, which give considerable interest arrangements. Many of the people doing businesses like Uber and Bolt are familiar with this type of financing. Furthermore, farmers who are doing large-scale agriculture can get such a loan to buy equipment like tractors, etc.
Checking if you qualify for a bank loan
The majority of the banks in Kenya provide you with an eligibility criterion for you to see if you qualify for a loan. They are not always the same, but they center around some common requirements, which I have shared below.
- Confirm your current CRB status to ensure that you have an appealing repayment record. Banks won’t lend to you if you have an outstanding default.
- Having a steady source of income, either your job or business, can really help you qualify for a loan. Proof like your payslip, bank statement, or business records is also important.
- Most loans require some form of security. So if you are seeking a loan, you can gather your title deed or logbook in one place.
- Check if you fall within the bank’s eligible age bracket. Also ensure that you have proper identification like your National ID or other documentation if you are a foreigner.
