Why Banks Have Reduced Returns for Savers

Hello and welcome to the Money News Roundup Newsletter, where we are covering why bank depositors are earning less returns. We also cover Kenya's new plan for a Ksh793 billion oil project.

Why Banks Have Reduced Returns for Savers

Kenyan savers have taken a significant hit this year as commercial banks sharply cut the interest they pay on deposits, as they increased lending to borrowers.

As reported by the Business Daily, Data from the Central Bank of Kenya (CBK) shows the sector’s average deposit rate fell to 7.63% in September 2025, down from 11.24% a year earlier.

With returns on short-term Treasury bills also dropping to below eight percent, banks have faced less pressure to compete for deposits, allowing them to reduce payouts more aggressively. 

As a result, depositors’ interest income dropped by Ksh42.7 billion, despite increasing their savings by Ksh152.8 billion to Ksh4 trillion.

Meanwhile, the cost of loans has not fallen proportionately. Average lending rates only eased to 15.07% from 16.91% leading to a widening of banks’ lending margins.

The top eight lenders grew their net interest income to Ksh149.7 billion, up from Ksh125.5 billion last year, as interest income from loans dipped by a modest 6.3% compared to the steeper fall in deposit costs.

This margin expansion has boosted earnings for large banks. Equity Bank Kenya posted a 51.2% jump in net profit, while KCB Bank Kenya recorded 6.4% growth. Several lenders, including Stanbic and NCBA, aggressively cut interest expenses by rejecting expensive deposits.

Despite repeated CBK pressure—through rate cuts and lower reserve requirements—banks have been slow to pass on lower funding costs to borrowers. The regulator hopes a new loan-pricing formula, set to take effect next month, will ensure banks fully transmit monetary policy cuts to the public.

Treasury on the Spot Over Its Use of Loans Collected From Bonds  

The Treasury is under scrutiny for using Ksh2.67 trillion in domestic borrowing to fund general government spending instead of development projects, as required by fiscal rules. 

A performance audit shows that between 2018 and 2023, Kenya borrowed Ksh2.97 trillion through Treasury bonds, but most of it was channelled to the Consolidated Fund Services to settle maturing debt and finance routine exchequer releases. 

As reported by Eastleigh Voice, Auditor General Nancy Gathungu says Ksh300 billion was not deposited into the Consolidated Fund and cannot be accounted for. 

She warns that mixing bond proceeds with other revenues makes it impossible to verify which projects were funded. 

The report also flags the lack of ringfencing for infrastructure bonds, risking investor confidence. The audit comes as public debt rises to 67.3% of GDP, with domestic borrowing surging amid a shift away from costlier external loans.

Reason Behind Slow Job Growth in Kenya - World Bank

The World Bank has warned that weak competition and dominance by major firms in key sectors—such as Safaricom in telecoms, Kenya Power in electricity, and leading fertiliser distributors—are driving up business costs, suppressing investment, and slowing formal job creation in Kenya.

In its latest Kenya Economic Update, the lender notes that high electricity prices, costly mobile data, and restricted market access hinder manufacturing and digital sector growth.

As reported by the Business Daily, despite 782,000 jobs created in 2024, only 15.5% were formal, down from 18.5% in 2010.

The report also cites distortions in the fertiliser subsidy programme and inefficiencies in transport licensing.

The World Bank urges pro-competition reforms to lower prices, boost productivity, and expand formal employment.

Meanwhile, the Bank revised Kenya’s projected growth upward to 4.9% on account of expected construction activity in the country.

Kenya Greenlights Ksh793B Turkana Oil Project, Targets First Oil by 2026

Kenya has reignited its oil ambitions with government approval of the South Lokichar Basin Field Development Plan (FDP).

As reported by the Star, Energy CS Opiyo Wandayi confirmed the submission of the approved FDP to Parliament for ratification, signaling progress after over a decade of delays that saw partners like Tullow Oil exit.

Gulf Energy Ltd now leads development, targeting six discoveries with an estimated investment of Ksh793 billion ($6.1 billion) and a best-estimate recovery of 326 million barrels over 25 years. Phase 1 aims for 20,000 barrels per day by 2026, scaling to 50,000 by 2032. 

The project is set to create jobs, boost local enterprise, improve infrastructure in Turkana and West Pokot, and strengthen Kenya’s economic base. 

Kenya and Malaysia Strike Duty-Free Deal for Agricultural Products 

President William Ruto on Monday announced new cooperation agreements between Kenya and Malaysia, including the removal of tariffs on Kenyan agricultural exports.

‍Citizen Digital reported that the move will open fresh market opportunities for farmers exporting tea, coffee, flowers, avocados, and titanium ores, while Malaysia continues supplying edible oils, electronics, chemicals, and rubber. 

The two countries also agreed to partner on STEM education, research, and human capital development. Malaysia will support Kenya in expanding semiconductor technology and manufacturing, including work at Dedan Kimathi University.

The President also praised Malaysia’s leadership in housing, healthcare, and infrastructure, saying Kenya aims to learn from their model. Malaysian Prime Minister Anwar Ibrahim commended Ruto’s focus on housing and said Kenya is poised to become one of Africa’s rising economic stars.

Paramount Bank Boosts Capital to Beat CBK Deadline

Paramount Bank has raised Ksh332 million through a rights issue, pushing its core capital to Ksh3.118 billion — above the Ksh3 billion regulatory minimum for December. 

The move comes as Nigeria’s Zenith Bank seeks approval to acquire the Kenyan lender, a deal that could ease future capital-raising needs as requirements rise to Ksh10 billion by 2029. 

As reported in the Business Daily, Paramount plans to expand digital banking, support SMEs and trade finance, and strengthen compliance and sustainability initiatives.

It is among 11 banks that needed extra capital after the new rules, with the group requiring a combined Ksh14.7 billion by June. CBK stress tests show lenders have submitted compliance plans, with options including downgrading undercapitalised banks to microfinance status.

M-Kopa Exports 15,000 Phones to Uganda Monthly

M-Kopa is now exporting 15,000 locally assembled smartphones to Uganda each month, accounting for 10% of the 150,000 devices produced at its Nairobi plant. 

The company has boosted its monthly output by 25%, up from 120,000 units last year, as part of a strategy to cut operational costs and reduce customer defaults.

As in the Business Daily, M-Kopa began trial shipments to Uganda in 2024 to avoid the 10% import duty charged on phones made in China. 

Phones assembled in Kenya enter Uganda duty-free under the EAC Common Market Protocol. The firm plans to increase exports and may set up a Ugandan assembly plant once demand grows.

M-Kopa assembles its own and select Nokia models in partnership with HMD, making it one of Kenya’s two major phone assemblers. It has produced over two million devices, expanded into refurbishment, and now provides free hospital cash insurance with Turaco Insurance to over two million customers.