If you’ve been following developments in Kenya’s financial sector, you may have noticed a quiet but important change announced by the Central Bank of Kenya (CBK). It’s called KESONIA, and while the name might sound technical, its impact could be felt across banking, lending and capital markets.
So what exactly is KESONIA, and why does it matter?
KESONIA stands for the Kenya Shilling Overnight Interbank Average. It is Kenya’s newly adopted risk-free reference rate, designed to reflect the real cost of short-term money in the banking system.
In simple terms, KESONIA tracks the average interest rate at which banks lend and borrow money from each other overnight, using actual transactions conducted in Kenyan Shillings. That makes it fundamentally different from older benchmark rates that relied more on policy signals or indicative pricing.
According to CBK, the move is part of a broader effort to modernize Kenya’s benchmark interest rate framework, improve transparency and strengthen how monetary policy decisions flow through the financial system.
Why CBK chose the overnight interbank rate
Globally, regulators have been moving away from benchmark rates that are based on estimates or limited submissions. Instead, the focus is shifting toward transaction-based rates that reflect real market activity.
KESONIA follows this global trend. Similar benchmarks already exist in other markets, such as SOFR in the United States and SONIA in the United Kingdom.
By anchoring Kenya’s benchmark to the overnight interbank market, CBK is aligning the country with international best practices while reducing the risk of distortion or manipulation.
How KESONIA is calculated
The process behind KESONIA is intentionally straightforward and transparent:
At the end of each business day, CBK collects data on overnight interbank transactions from participating banks. This data is then reviewed to ensure it accurately reflects that day’s trading activity.
Once validated, CBK calculates:
- The KESONIA rate for that day, and
- A KESONIA Compounded Index, which is useful for longer-term interest calculations.
The final figures are published by 9:00 AM on the next business day. During weekends and public holidays, the rate remains unchanged from the previous working day.
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