Borrowing to grow a business in Africa can incur interest rates up to six times higher than in the Eurozone. Commercial banking leaders say that contrary to popular belief they want to reduce interest rates and point to the conditions needed to make lending more affordable.

By Oliver Nieburg

This month, the Manufacturers Association of Nigeria warned that an “exorbitant cost of borrowing” is choking industrial expansion, while the Kenya Private Sector Alliance called the cost of credit “a major challenge” for many enterprises.

Most Nigerian banks charged 21% to 26.5% in June 2026. Kenyan rates have slipped slightly but remain high at 14.38%, according to a central bank report dated 29 July.

Euro-area businesses by comparison can borrow far cheaper at around 3.6%.

Ecobank: ‘High pricing doesn’t serve anyone’

Speaking on Africa CEO Forum TV at AFIS’ sister event, Jeremy Awori, Group CEO of Ecobank said: “Contrary to what people believe, we don’t want a high cost of credit because it’s harder for a business to pay back. It puts you more at risk because they’re paying more for their facilities than they need to.

“We need a decent margin, of course, because we have to cover our costs and we need to leave something to make a profit for our own shareholders. But we are not after very high pricing because it doesn’t serve anyone.”

Ecobank’s CEO said the economics underpinning bank lending differ fundamentally between Europe and Africa, but that Ecobank can offer single-digit interest rates in francophone West Africa because the West African CFA franc is pegged to the euro and inflation is lower than in countries such as Ghana and Nigeria.

Equity Bank and Bank of Kigali: Market risks and low savings rates

AQ Hamza, Group Director of International Trade Relations at Equity Group – a Nairobi headquartered bank aiming to operate in 15 African countries by 2030 – added: “Although it may seem like interest rates are high, they’re a reflection of the current market risks or structural market risks that we face at the moment.”

Diane Karusisi, CEO of Bank of Kigali, said a major factor keeping credit expensive is low savings rates.

“Generally, on the continent savings rates are not where they should be. So, the demand for credit is high – but people are not saving. So that imbalance is making of cost of credit scarce, funding scarce, especially long-term funding, and therefore expensive.”

She continued that most banks have short-term funding while business clients are looking for medium to long-term credit for their capex investments and expansion. “So that mismatch has a cost,” she said.

How to lower interest rates

To achieve lower interest rates that than even commercial banks would like to be able to offer, Ecobank’s Jeremy Awori called for macro discipline. “We’ve always said if you run your country finances well you keep inflation under check then we’ll start seeing that risk-free rate coming down.”

Bank of Kigali’s Diane Karusisi said competition between banks and making the loan application process more efficient could also cut costs.

“Sometimes, when the process is long and the turnaround time is weeks instead of days, there are lost opportunities for businessmen,” she said.

She continued that alternative data – such as staff salaries and utility bills – could be deployed through fintech partnerships to better score and assess clients, which may help lower costs, especially for informal or semi-informal SMEs

Asked if fintech lenders also pose a threat, AQ Hamza of Equity Group said banks still have deeper balance sheets to be able to offer lower rates.

“At Equity, we have a balance sheet of about $16 billion. We have a single obligor limit, so how much we can lend to a single customer across the group, of about $675 million. So right now, those are not, at least on the continent, numbers that some of the fintechs are able to hit.”

He said banks cannot however “sleep on it” and should continue to assess what fintechs are getting right in serving customers.

Central bank rate caps: A failed experiment?

Interest rate ceilings imposed by central banks onto commercial lenders have been touted as another solution to cap credit costs in recent years.

The Central Bank of Kenya capped lending rates for commercial banks from 2016 to 2019, but the policy was repealed after banks shifted towards lower-risk borrowers and reduced SME lending.

“I’m not sure that is the best solution,” said Jeremy Awori. “The experience [in Kenya] was that we saw a slump in private sector lending. We moved about 15% private sector growth year on year to zero, almost negative. So, it had the opposite effect that was intended.”

He suggested instead to focus on fostering an enabling ecosystem, helping banks reduce risk and lower costs. “Are we investing in collateral management systems? Are we investing in making sure credit bureaus are working properly? Recovery of assets when people default — is it efficient? Are the court systems efficient? All those costs come into the cost of borrowing,” he said.

The Ecobank chief added that banks can build SME services beyond credit that would reduce the need for business loans, such as cash management, FX and real-time settlements.

“If you get real time settlements then you don’t need as much credit because you can get paid faster,” said Awori.

Will the Iran conflict & oil prices see interest rates rising even higher?

Global instability could however raise credit costs further and increase non-performing loan ratios. The Iran-US war, now in its sixth month, has pushed up oil prices and prompted the World Bank to cut sub-Saharan Africa’s 2026 growth forecast to 4% from nearly 4.5%.

Speaking in May 2026, Jeremy Awori said shipping premiums and insurance premiums were already rising, and that companies reliant on imports or foreign exchange, or in oil-importing countries, could suffer most.

“There will be medium- and long-term effects, even now, in terms of economic growth and, in some cases, business survival,” he said.

“So, if we see this lasting a long time, then I think it’ll be more challenging to see credit grow. We’ll see higher NPLs for sure, and that tends to get more selective with where you put your lending,” he continued.

He suggested that banks should continue to support struggling businesses as they had during the COVID crisis as “many customers actually became good”.

Bank of Kigali’s Diane Karusisi also said in May that Middle East turmoil was already hitting her customers, and that rather than wait for defaults, the bank was moving early to offer client support.

“We get in touch with them. And I think with that we’ll be able to probably minimise the impact of the current situation on our balance sheet but also making sure that our clients are not too affected.”

Watch the full interview “Has Africa’s cost of corporate & SME credit become too high?” HERE.