CBK Unveils New Formula for Calculating Loan Interest Rates

Hello and welcome to the Money News RoundUp Newsletter. Today, we are covering the new CBK formula for loan interest rates and why wealthy Kenyans are moving their assets abroad.

CBK Unveils New Formula for Calculating Loan Interest Rates

The Central Bank of Kenya (CBK) has unveiled a revised Risk-Based Credit Pricing Model (RBCPM), set to take effect on September 1, 2025, for all new variable rate loans.

Existing variable-rate loans will transition to the new model by February 28, 2026, following a six-month adjustment period.

The revised model aims to enhance transparency, promote responsible lending, and improve the effectiveness of monetary policy. It introduces a pricing formula based on the newly renamed Kenya Shilling Overnight Interbank Average (KESONIA), which replaces the current overnight interbank rate. 

As reported by The Eastleigh Voice, the lending rate will now be calculated as KESONIA plus a premium (“K”) that accounts for lending costs, expected returns, and borrower risk.

CBK emphasized that the name change to KESONIA reflects global standards like the UK's SONIA and the US’s SOFR. 

Banks are required to publish their lending rates, average premiums, and fees on their websites and the Total Cost of Credit (TCC) portal for public access.

While KESONIA will apply to most variable loans, exceptions include foreign currency and fixed-rate loans

Controller of Budget Explains Why She Cannot Perform Oversight Over Housing Levy 

As reported in the People Daily, Controller of Budget (COB) Margaret Nyakang'o has revealed that her office cannot perform oversight duties on the budgeting and use of money collected for the Housing Levy, which is estimated to be Ksh63 billion annually.

In a report of the Constitutional Implementation Oversight Committee of the National Assembly, Nyakang'o explained that the fund is classified as a Levy, hence it is not budgeted for. Therefore, the tax falls outside the mandate of her office.

"The housing levy exclusion from oversight creates significant accountability gaps," the CoB noted in her report.

As a result of the legal loophole, MPs want to amend the law, which will see all special funds and levies monitored by the CoB.

The Housing Levy was introduced in the Finance Bill 2023. After its introduction, salaried Kenyans pay 1.5% tax to the levy that funds the Affordable Housing project across the country.

Kenya Loses 400 Dollar Millionaires as Rich Shift Wealth Abroad

Kenya has seen a decline of 400 dollar millionaires over the past 18 months, with the number of high-net-worth individuals (HNWI) falling to 6,800 by June 2025, down from 7,700 in 2022. HNWIs are individuals with a net worth of at least $1 million (Ksh129.2 million).

As reported in the Business Daily,  the drop is attributed to economic uncertainty and youth-led protests, prompting the wealthy to shift their money abroad. 

Due to this, Kenya fell to fifth place in Africa’s ranking of countries with the most dollar millionaires, overtaken by Morocco. South Africa leads with 41,000 millionaires, followed by Egypt, Morocco, and Nigeria. 

The number of Kenyan centi-millionaires, whose worth is over $100 million (Ksh12.9 billion), remained unchanged at 16. 

How County Accountant Embezzled Ksh100M in Allowances

On Tuesday, August 26, 2025, the EACC arrested Hezron Opiyo, an accountant with Siaya County Government, for allegedly embezzling about Ksh100 million through fraudulent allowance payments.

As reported by Citizen Digital, investigations revealed that the accountant processed fictitious payments disguised as training and official engagement allowances that never occurred.

The Director of Public Prosecutions approved the criminal charges, and Opiyo is set to appear before the Kisumu Anti-Corruption Court on Wednesday, 27th August. He is currently held at Kisumu Port Police Station. 

EACC states that it is also pursuing the recovery of Ksh102,950,307, plus interest. 

Meanwhile,  seven other related cases involving over Ksh700 million payments for allowances remain under investigation.

Kenya Airways Makes Ksh12B Loss in First Half-Year Results

Kenya Airways (KQ) has reported a net loss of Ksh12.15 billion for the half-year ending June 30, 2025, reversing a profit of Ksh513 million recorded during the same period last year.

The Standard reported that the loss is attributed to aircraft unavailability, with three Boeing 787-8 Dreamliners grounded due to global supply chain disruptions and engine shortages. 

Last year, KQ posted its first half-year profit in over a decade and a full-year profit of Ksh5.4 billion.

KQ CEO Allan Kilavuka described the setback as temporary, citing aviation’s cyclical nature. He emphasized the growing demand for African travel and expects full fleet availability by 2026. The grounding affected 33% of the airline’s wide-body fleet, impacting long-haul operations and overall performance.

Old Mutual to Exit Real Estate Market, Targets Sale of Ksh19B Assets

Old Mutual Holdings Plc plans to exit the East African real estate market by selling its entire property portfolio, including the 31-storey Old Mutual Tower in Nairobi. 

The move is part of a broader restructuring strategy, following weak returns, flat property valuations, and low rental yields. 

As reported in the Business Daily, CEO Arthur Oginga confirmed ongoing sales and negotiations in Kenya, Uganda, Rwanda, and South Sudan. 

The firm’s property value dropped from Ksh21.2 billion to Ksh19.4 billion, with the Upper Hill tower valued at Ksh5.5 billion. Other key assets include Equity Centre in Kenya and Nakawa Business Park in Uganda.

Flour Tycoons Acquire Savannah Cement for Ksh3.8B

A group of wealthy investors linked to Mombasa Maize Millers, Kitui Flour Millers, and Eldoret Grains Limited has acquired Savannah Cement for Ksh3.8 billion through a new firm, Savannah Cement 2025 Limited. 

As reported by the Business Daily, the company was under receivership by KCB and Absa Bank due to a Ksh14.1 billion debt.

The sale, approved unconditionally by the Competition Authority of Kenya on August 25, 2025, is expected to preserve jobs and revive operations.

The acquiring firm is jointly owned by SMA Investments, Montgate Holdings, and Mo Ali Kenya. The transaction attracted over a dozen suitors amid growing interest in Kenya’s cement sector, fueled by booming real estate activity.