Kenyans with bank savings earned Sh22 billion less in the year to June 2025 after major lenders, including KCB, Equity and NCBA, cut deposit rates under pressure from the Central Bank of Kenya (CBK) to lower borrowing costs and revive private-sector credit.
Data shows depositors received Sh89.9 billion in interest, down from Sh111.9 billion a year earlier, even as total deposits grew 2.8% to Sh4.24 trillion. The CBK, which reduced the Central Bank Rate (CBR) for seven consecutive meetings, forced banks to trim fixed-deposit yields to 8.37% in June, down from 11.48% a year earlier. The repricing shifted incentives across the financial system, favouring borrowers while punishing passive savers.
The impact was immediate. NCBA cut payouts by 42.8% (Sh7.9 billion reduction), while Equity reported an outflow of about Sh98 billion group-wide as treasuries’ appeal waned and lenders shed costly deposits. Banks defended the move as strategic, saying it would “manage down funding costs now and rebuild loan books later” amid tighter credit discipline and elevated default risks.
At the same time, alternative investments delivered stronger returns. Government bonds yielded 12–14%, money market funds returned about 13%, and the NSE gained roughly 24.3% over the same period. Retail savers relying solely on bank deposits, however, earned just 3.76%, compared to 4.1% previously, leaving them exposed to negative real returns after inflation.
The liquidity shift is already playing out in markets. August bond auctions attracted a record Sh323.4 billion, though the CBK only accepted Sh95 billion to keep interest rates stable. Bank spreads widened to 9.2% in June from 8.5% a year earlier, even as average lending rates eased slightly to 15.8%.
Looking ahead, analysts say liquidity is migrating from government securities to private-sector lending in the second half of 2025. But lenders will need to convert cheaper funding into productive credit, while consumers are expected to diversify toward bonds, money markets, and equities instead of “sitting on cash at negative real interest rates.”
