Nairobi — The reduction of interest rates by lenders in the country will spur borrowing, a new report has revealed.

Faida Investment Bank, in its 2025 Macroeconomic Outlook, indicates that the move will see more liquidity advanced into the economy by lenders.

The bank's 2025 Macroeconomic Outlook underscores that the Central Bank of Kenya's (CBK) move to ease lending conditions will lead to increased private-sector borrowing.

"Looking ahead, we anticipate a rebound in private-sector lending owing to the apex bank's consistent easing efforts," the report noted.

Additionally, the International Monetary Fund (IMF) projects that private-sector lending will climb to 12.4 percent by 2026.

CBK had, in February, scaled down its base lending rate by 0.5 percent to 10.75 percent in what it says is anchored on enhancing the flow of credit to the private sector and reducing borrowing costs.

This move is expected to be replicated across the banking sector, with banks moving to comply with is directives.

In tandem, CBK lowered the Cash Reserve Ratio (CRR) for banks by 100 basis points to 3.25% to complement the lowering of its rate and support the lowering of lending rates.

This change according to CBK is expected to free up to Sh57 billion for lending.

This decision follows a series of rate cuts in late 2024, aimed at boosting economic activity which had been slowing.