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Kilonzo: Banks Ready for Risk-Based Pricing
NCBA’s Muathi Kilonzo on Risk-Based Lending and Banking Outlook
Kenya’s banking sector is adjusting to the new risk-based credit pricing model against a backdrop of moderating inflation and elevated interest rates.
Muathi Kilonzo, Managing Director of NCBA Investment Bank, shared insights on how banks, including NCBA, are navigating these changes during an interview with CBNC.
Lending Strategy Under Pressure
As of July, Kenya’s inflation stood at 4.15 percent, while the CBK lending rate hovered at 15.24 percent. With private sector credit growth still sluggish, Kilonzo noted that banks are adapting their lending strategies carefully.
“CBK measures to reduce the policy rate are trying to spur private sector credit growth, and we are seeing some impact, particularly in the Treasury bill market,” Kilonzo said.
“The 91-day T-bill is now around 8 percent, down from double digits not too long ago. This is encouraging activity as investors look for yield, even if lending volumes remain subdued.”
Investment Shift Driven by Local Participation
Kilonzo highlighted a shift in Kenya’s capital markets. “The Nairobi Securities Exchange, which was once dominated by foreign participants, is now driven by local investors,” he said.
“This has boosted our brokerage business, while our unit trusts and wealth management divisions are experiencing remarkable growth. Kenyans are actively seeking diverse investment options.”
Kilonzo: Banks Ready for Risk-Based Pricing
NCBA Investment Bank is shaping conversations around wealth management, investment advisory, and the future of capital markets in Kenya and across Africa.
By offering a mix of innovative investment solutions, tailored advisory services, and active participation in market development, the bank is helping both institutional and retail investors build resilience while unlocking new opportunities for growth.
Sectors Showing Resilience
On sector performance, Kilonzo pointed to tourism and exports as bright spots. “The coffee industry is strong, and tourism continues to perform well,” he said. However, manufacturing remains sluggish, which he described as unsurprising given structural challenges.
Risk-Based Lending: A Positive Shift
On the new lending framework, Kilonzo urged patience as banks and customers adjust. “This model is not reinventing the wheel, it’s aligned with global practices,” he said. “It will take a few months for the industry to settle, but having certainty on loan pricing is a positive development for the economy.”
Addressing NPLs and Liquidity Concerns
Kenya’s non-performing loans remain high, at about 14 percent. Kilonzo acknowledged the challenge but expressed optimism. “As GDP growth picks up, export earnings rise, and tourism recovers, we expect improvement on this front,” he said.
Liquidity concerns, particularly around Eurobond maturities, have also eased. Kilonzo pointed to improved FX reserves, Kenya’s recent credit rating upgrade by S&P, and stability in the shilling as signs of renewed confidence.
Outlook for the Sector
Looking ahead, Kilonzo emphasized the role of consumer spending. “As confidence improves and more money flows into people’s pockets, banks will see stronger lending activity.”
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