Kenya’s Central Bank Fines 11 Banks for Risky Lending and Poor Governance in 2024

In 2024, Kenya’s central bank fined 11 banks for risky lending and poor governance. This shows how serious the Central Bank of Kenya (CBK) is about making sure banks follow the rules while helping the economy. Even though interest rates were lowered to make borrowing cheaper, the CBK wants banks to lend money carefully and responsibly.

Last year, the CBK’s Monetary Policy Committee reduced the main interest rate from 13% to 9.75%. The aim was to encourage banks to offer cheaper loans to people and businesses. But banks did not lower their loan rates fast enough. To fix this, Kenya’s central bank fines 11 banks for risky lending and poor governance in 2024 to remind them to play by the rules and pass the benefit of lower rates to borrowers.

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One big problem was that nine of the banks lent too much money to a single customer or business. There is a rule that no one borrower should owe more than 25% of a bank’s core capital. Breaking this rule is risky because it can hurt the bank if that borrower has trouble paying back. Also, some banks lent too much to insiders like employees and directors, which is not allowed. The CBK found problems with ownership too—some banks had owners controlling more than 25%, which is against the rules and weakens good management. In addition, three banks did not keep enough cash or other quick assets to cover withdrawals, failing the 20% liquidity rule.

The CBK collected KSh191 million in fines from these banks and from forex bureaus. Although slightly fewer banks were fined compared to last year, the Central Bank of Kenya fines 11 banks for risky lending shows it is still tough on risky behavior. The CBK did not reveal the names of the banks or exact penalties to avoid shaking public confidence.

This move is part of a bigger effort by the CBK in recent years to clean up Kenya’s lending system. The regulator has been controlling things like how much ownership one person can have in a bank and setting strict rules for digital lenders. With tighter licensing, the number of approved digital lenders has gone down to just over 50. The CBK wants to protect customers and stop risky lending in digital finance too.

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The central bank is working hard to balance easier borrowing with strong rules. It wants banks to lend more cheaply but also to be careful, keep enough capital, and follow good management practices. This means banks may check loan applications more closely and plan better for money they keep on hand. Over time, making sure banks stick to these rules should reduce risks and help the economy grow safely.

Kenya’s central bank fines 11 banks for risky lending and poor governance in 2024 as part of its plan to keep the banking system strong and fair. By lowering interest rates but also enforcing rules firmly, the CBK hopes to make loans cheaper and safer for everyone. This careful approach aims to protect Kenya’s banking sector and support steady growth for businesses and families.

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