Kenya’s Supreme Court rules CBK must follow public participation before directing interest rate changes, overturning a 2020 directive by ex-Governor Njoroge.
NAIROBI, Kenya – June 2025:
In a landmark judgment, the Supreme Court of Kenya has ruled that the Central Bank of Kenya (CBK) cannot unilaterally compel commercial banks to adjust interest rates without following legal procedures and engaging the public. The court declared the 2020 directive by then-Governor Dr. Patrick Njoroge unconstitutional since it lacked lawful authority and stakeholder consultation.
➡️ Internal link: Overview of Kenya’s Regulatory Framework
KBA Triumphs Over Regulator
The Kenya Bankers Association (KBA) filed the suit, asserting that the CBK exceeded its mandate. A lower court had backed the regulator, but the Supreme Court reversed this decision.
A five-judge bench, led by Chief Justice Martha Koome, ruled:
“CBK must act within the confines of the law. Directives with far-reaching economic implications must undergo public participation and legal scrutiny.”
➡️ Internal link: Previous KBA Legal Wins
Implications for Monetary Policy
While the CBK retains autonomy over monetary policy, the court emphasized that significant regulatory changes must involve:
- Publishing draft regulations
- Conducting public participation
- Consulting affected stakeholders, especially on credit costs
This ruling sets a precedent for transparency in financial regulation.
➡️ Internal link: The Role of Public Participation in Financial Governance
Emergency Powers Have Limits
Although the directive was issued amid the COVID-19 pandemic, the Court emphasized that emergencies do not nullify constitutional safeguards.
“Crises do not create legal loopholes,” it stated.
➡️ Internal link: Kenya’s COVID-19 Regulatory Framework
Impact on Banks and Borrowers
The ruling brings clarity and accountability to Kenya’s banking sector:
- Reinforces legal certainty in lending
- Limits regulatory overreach
- Ensures future interest rate policies undergo public scrutiny
➡️ Internal link: How Interest Rates Are Set in Kenya
➡️ Internal link: Consumer Rights in Lending
Final Word: Strengthening Checks & Balances
This verdict is a crucial step forward for Kenya’s financial justice system, affirming that even powerful institutions like the CBK must adhere to constitutional norms and include citizens in decision-making processes.
➡️ Internal links for deeper exploration: