Co-operative Bank of Kenya has announced that it will begin implementing a new Risk-Based Credit Pricing Model for all variable-rate Kenya Shilling loans starting 1st December 2025, marking a significant shift in how the bank will determine interest rates for its borrowers.
The move follows the Central Bank of Kenya’s revised guidelines on credit pricing, which require lenders to align loan rates with the actual risk profiles of customers to enhance fairness, transparency, and responsible lending practices in the financial sector.
KESONIA to Anchor New Lending Rates
Under the updated pricing framework, Co-op Bank will adopt the Kenya Shilling Overnight Interbank Average (KESONIA) as the new reference rate for all variable-rate loans. This benchmark, published by the CBK, reflects real market conditions and replaces older reference models.
Co-op Bank will publish the applicable KESONIA rate each month on its website and other channels, allowing customers to track changes and understand how their loan rates are determined.
New Loan Structure Explained
The bank confirmed that interest rates for new Kenya Shilling credit facilities will now be calculated using the formula:
KESONIA + Customer Premium (K)
This means each customer’s rate will depend on:
The prevailing overnight interbank rate
Their individual credit risk assessment
The bank also emphasized that all fees and charges will be disclosed upfront, consistent with Total Cost of Credit requirements.
Existing Loans to Transition by February 2026
While the new model takes effect immediately for new loans, existing variable-rate facilities will gradually transition to the KESONIA-based framework by 28th February 2026. Customers will receive updates and revised loan terms as the migration progresses.
Bank Reassures Customers of Competitive Rates
Co-op Bank reiterated that the shift to risk-based pricing does not change its commitment to offering affordable credit products. The lender said it will continue providing competitively priced loans while complying with CBK’s enhanced regulatory standards.
The notice added: “We thank you for your valued relationship with Co-op Bank and look forward to serving you more.”
