BANK OF KENYA Haile Selassie / P.O. Box 60000-00200 Nairobi, Telephone: 2860000, Fax: 340

Microfinance Banking Circular No. 2 Of 2015

TO: ALL CHIEF EXECUTIVES OF MICROFINANCE BANKS CHANGE OF THE KENYA BANKS' REFERENCE RATE Following the Monetary Policy Committee meeting held on 7th July 2015 which raised the CBR from 10.0 percent to 11.50 percent, and considering the weighted 2month moving average of the 91-day Treasury bill rate, the Central Bank of Kenya (CBK) has revised the Kenya Banks' Reference Rate (KBRR) from 8.54 percent to 9.87 percent.

The purpose of this Circular is to notify you of the following:- l . The revised KBRR of 9.87 percent is effective from 7th July 2015 until its next review.

2. All microfinance banks are required to price their flexible rate loans using the KBRR as the base rate.

3. For individual microfinance banks, the interest rate they charge their customers is KBRR + K.

4. As indicated in the Microfinance Banking Circular No. 1 of 2014, existing flexible/variable credit facilities were transitioned to the KBRR framework by 30th June 2015. As a result, all flexible/variable credit facilities are now subject to KBRR.

5. The obligations of microfinance banks to disclose to their customers and report to the Central Bank on their risk premiums (K) above KBRR stands.

The CBK will continue working closely with the banks and other stakeholders to facilitate a smooth and effective implementation of the KBRR framework. It will also work with the stakeholders to facilitate the wide dissemination of information on the framework to the public.

l Natu MATU MUGO ASSISTANT DIRECTOR, BANK SUPERVISION 7th July, 2015 Cc.

x Mr. Benjamin Nkungi Chief Executive Officer Association of Microfinance Institutions (AMFI) Methodist Ministries Centre Oloitoktok Road off Argwings Kodhek Road, Lavington P.O. Box 10701-00100 NAIROBI