KESONIA Explained: 6 Simple Ways It Now Sets Your Kenyan Loan Rate

Updated 7 November 2026

KESONIA, the Kenya Shilling Overnight Interbank Average, is now the starting point for the interest rate on most variable-rate shilling loans in Kenya. Your bank adds a customer premium, called K, on top. KESONIA applied to new variable-rate loans from 1 December 2025 and to existing ones from 28 February 2026. In the week to 5 November 2026 it stood at 8.75%, according to the Central Bank of Kenya.

Checked on 7 November 2026 against the CBK press release on the revised Risk-Based Credit Pricing Model, the CBK weekly bulletin of 6 November 2026 and Co-operative Bank’s KESONIA customer page.

Contents: What KESONIA is · The formula · Worked example · Which loans · Lower your K · Check your bank · CBK link · FAQ

1. What KESONIA is

KESONIA is the average rate at which Kenyan banks lend shillings to each other overnight. CBK computes it from interbank deals and publishes it daily. Because the figure comes from real market trades, it moves with CBK’s policy rate and with how much cash banks have. The 6 November 2026 bulletin reported that KESONIA “remained stable at 8.75 percent” while banks held KSh 31.9 billion in excess reserves.

2. The formula: KESONIA plus K

Under CBK’s revised Risk-Based Credit Pricing Model, the rate on a variable-rate shilling loan is:

Loan rate = KESONIA + K

K is the bank’s premium. It covers the bank’s operating costs, a return to its shareholders and the borrower’s risk. Co-op Bank’s page puts it plainly: lower-risk borrowers get better rates, higher-risk borrowers pay more, and “two borrowers in the same customer segment can have different pricing”.

Each bank sets its own K for different customers, so comparing banks means comparing their K and the other costs in the total cost of credit, not the benchmark itself, which is the same for everyone.

3. A worked KESONIA loan example

This example is illustrative. The premium is an assumption, not any bank’s quote.

• Benchmark: 8.75% (CBK, week to 5 November 2026).
• Assumed premium K: 6.00%.
• Loan rate: 8.75% + 6.00% = 14.75% a year.
• If the benchmark later falls to 8.25% and K stays at 6.00%, the rate becomes 14.25%.
• If the bank reviews your risk and raises K to 7.00%, the rate becomes 15.75% even though the benchmark has not moved.

So your rate can change for two reasons: market moves in the benchmark, and a change in your own K. Co-op Bank says it will send a pricing change notice when a customer’s K changes during its regular reviews.

4. Which loans KESONIA covers

• Covered: variable-rate loans in Kenya shillings, including most personal, business and mortgage loans on variable terms.
• New loans: from 1 December 2025.
• Existing loans: moved to the new pricing by 28 February 2026. Co-op Bank said customers would get pricing notices in January 2026.
• Not covered: fixed-rate loans and all foreign-currency loans.

Co-op Bank also says the switch did not bring new fees or charges.

5. How to lower your premium K

Because K reflects your risk profile, your own banking behaviour matters. Co-op Bank advises customers to:

• route business sales and salary through their account with the bank;
• repay loans on time, every time.

Other practical steps: keep your CRB record clean, offer security where it suits you, and ask for a review once your repayment record improves. Use our loan comparison guide to see how banks price similar loans.

6. What to check with your bank

1. Is your loan fixed or variable? Only variable shilling loans follow the benchmark.
2. What is your current K, and when was it last reviewed?
3. Which benchmark figure does the bank use, and how often does it reset? Co-op Bank publishes the rate it applies each month.
4. What is the total cost of credit (APR), including fees and external charges?
5. How will you be told about changes, and how much notice will you get?

For bank-by-bank borrowing options, see our guides to bank personal loans and Co-op Bank loans.

Why KESONIA follows CBK’s decisions

The overnight average is set in the interbank market, but that market reacts to the Central Bank. When CBK lowers its policy rate or adds cash to the system through open market operations, overnight lending between banks usually gets cheaper and the benchmark tends to fall. When cash is tight, it rises. The 6 November 2026 bulletin showed a liquid market: banks held KSh 31.9 billion above the 3.25% cash reserve requirement, and about 16 interbank deals a day worth an average of KSh 9.2 billion.

The aim of the new model is that rate cuts reach borrowers faster and more visibly, because the benchmark is public and the premium must be disclosed. Whether your own rate falls still depends on your K. Our report on the Treasury’s call for banks to lower lending rates shows the gap that remained between policy and loan rates this year.

Frequently asked questions

What does KESONIA stand for?

Kenya Shilling Overnight Interbank Average. CBK calculates the figure from interbank lending rates and publishes it daily.

What is the KESONIA rate now?

CBK’s 6 November 2026 bulletin said the rate remained stable at 8.75% in the week to 5 November 2026. Check CBK’s website for the latest figure.

Does KESONIA apply to my fixed-rate loan?

No. Fixed-rate loans and foreign-currency loans are exempt. The benchmark applies to variable-rate Kenya shilling loans.

Why is my loan rate higher than my friend’s at the same bank?

Because the premium K depends on each borrower’s risk profile. Two customers in the same segment can pay different rates.