Bankers call it risk based pricing — Kenyans call it expensive loans. Central Bank Governor Kamau Thugge is now defending the reviewed regime, promising it will clean up the financial sector, but many citizens fear it could make borrowing an even heavier burden.
Risk based pricing allows banks to set interest rates based on a borrower’s credit risk instead of one uniform cap. Thugge argues this will strengthen financial stability by ensuring responsible lending, cutting off defaulters, and rewarding borrowers with good credit history.
The Central Bank has issued enforcement measures requiring all financial institutions to align with the new framework, warning that lenders who fail to comply will face penalties. The aim, according to CBK, is to reduce bad loans and restore discipline in the banking sector.
For the mama mboga seeking a small loan to restock vegetables, “risk based pricing” could mean higher interest just because she has no formal credit history. For the boda rider repaying a shylock loan, it could mean being locked out of formal credit entirely. While banks are promised protection, ordinary Kenyans fear exclusion.
Without safeguards, the new system risks punishing the poor while rewarding only the elite with bank accounts, payslips, and clean credit records.
Article 46 of the Constitution guarantees consumer rights, including protection from unfair lending practices. Article 43 speaks to economic and social rights — meaning access to credit is not just a privilege, but a lifeline for millions of hustlers. Enforcement of risk based pricing must not create a system where the poor are locked out of opportunity in the name of stability.
Governor Thugge says risk based pricing will stabilize banks — but Kenyans will judge it by whether it stabilizes their pockets. A fair system must protect both lenders and borrowers. Anything less, and the promise of financial inclusion will remain another broken dream.
