Chairperson of the Presidential Economic Advisor David Ndii has raised questions over the loan pricing in the country affecting the economy.
Ndii's concerns come days after the Central Bank of Kenya (CBK) cut the lending rate basis point by 50 points amid the push and pull to provide cheaper loans to Kenyans.
According to Ndii, most of Kenya's banks use risk-based lending, and while bankers argue this approach helps banks set loan rates based on individual risk profiles, improving pricing accuracy and diversifying financial products, Kenya's informal economy makes risk pricing difficult.
In risk-based lending, borrowers who are considered riskier, like those with poor loan histories or unstable income, are charged higher interest rates, while those with better creditworthiness receive lower rates.
