Kenyans are set to start accessing cheaper loans as banks lower their interest rates following the reduction of Central Bank of Kenya (CBK) benchmark lending rate from 18 percent to 16.5 percent.Most banks in the East African nation have announced they will drop their lending rates by 1.5 percent, starting next month.  The move will enable Kenyans, institutions and individuals, to access loans at interest rate of at least 21 percent, down from 30 percent. Some of the banks that have lowered their lending rates include Barclays, Co-operative, Bank of India and CFC Stanbic. Barclays Bank slashed its lending rate to 21 percent down from 22.5 percent.Bank of India has reduced its lending rate to 21.5 percent while Co-operative and CFC Stanbic interest rates stand at 21.5 percent and 22.5 percent respectively. Commercial banks interest rates in Kenya jumped from about 14 percent in December last year to between 24 percent and 30 percent after CBK, through its Monetary Policy Committee, raised its benchmark lending rate from 6 percent to 18 percent.The move, according to CBK was to rein-in on inflation, which had hit 20 percent and strengthen the shilling that had depreciated against world major currencies, exchanging against the dollar at 107. Its high benchmark lending rate, noted CBK, has helped to check on runaway inflation and stabilise the local currency. Data from Kenya National Bureau of Statistics released last month indicates that the rate of inflation in the East African nation dropped to 10.05 percent, down from 19.7 percent in December.On the other hand, the Kenya shilling is currently trading at an average of 84 against the U.S. dollar, 130 against the Sterling Pound and 102 against the Euro.”The Kenya shilling has strengthened against major international currencies. In the week ending July 12, the shilling appreciated by 0.02 percent, 0.93 percent and 2.34 percent against the U.S. dollar, the Sterling Pound and the Euro respectively,” said CBK in its weekly report.The positive developments in Kenya’s economy, CBK noted, have indicated that its monetary policies are working.”Monetary policy measures adopted continue to deliver favourable macroeconomics outcomes. Inflation continues to decline while exchange rates remain stable,” noted the regulator while announcing a drop in its base lending rate by 150 percent basis points early this month.High interest rates, which have persisted for the past six months, have had a negative impact on various sectors of Kenya’s economy.In the housing sector, high lending rates, which pushed up mortgage rates, have prevented many people from taking mortgages. Mortgage rates currently stand at between 17 percent and 24 percent.However, HassConsult, a real estate company, in a report released last week, noted that mortgage rates have started to fall as industry players became more creative and focused in making home ownership products accessible. In the banking sector, a new report from Renaissance Capital indicates that the rate of non-performing loans in the first quarter of this year increased by 1.3 percent. "The ratio of non-performing loans may increase to 5 percent in the second quarter of this year hitting a peak in 2013,” warned the report, which among other things attributed the negative forecast to high interest rates.In trying to prevent customers from defaulting in loan repayment when interest rates increased in December, commercial banks   extended loan tenures of clients. While the move helped existing borrowers, potential clients kept away from banks, which also tightened their purses. Many borrowers, especially those in employment, turned to Saccos, whose interest rates remained at 12 per cent. Others turned to shylocks, who in the capital Nairobi, are scattered in the central business district and various residential areas. The shylocks offer cash against household equipments, motor vehicle log books, land title deeds among other assets. The loan sharks charge interest rates depending on the amount of money loaned or who is borrowing.Their interest rates range from between 18 percent to 50 percent per month. Sometimes, the traders charge interest rate per day, standing at 10 percent.  "With such high interest rates, chances of defaulting in repaying are too high. The shylocks will even do everything possible to ensure you default, for instance they undervalue the items you give them,” Benson Kisiari, who once lost his items to a shylock, noted on Thursday.