The high interest rates that the financial industry has been witnessing are not  helping the banks. Although many banks posted growth in pre tax profits in their half year results for the six months to June 2012, experts say the high interest rates have been hurting borrowers, and in the long run would hurt the lenders as well.

According to NIC Bank Group Managing Director,  James Macharia, banks being intermediaries of the finance system, their business depends on borrowers taking loans and advances from them. Macharia says if high interest rates persist, borrowers will shy away from taking loans and in the long run banks will lose revenues. He explains that the rates have not come down fast following the Central Bank's reduction of the base because fixed depositors had fixed higher rates which banks must fulfill.

"When CBK revises the base rate downwards, people expect us to follow suit overnight, but our depositors are still stuck with the high rates," explained Macharia in an interview with Capital News, "But we are keen that when the deposits mature, we will price them down and pass the benefit to our borrowing customers.

Central Bank of Kenya lowered its base lending rate to 16.5% in July prompting several banks to lower their rates by the same margin. The MPC meets again on the 5th of September and players in the financial sector expect that CBR will be lowered further, a move that would see borrowers enjoy lower rates on loans.