Interest Rate

The percentage charged by a lender for the use of borrowed money, usually expressed as an annual percentage. It represents the cost of borrowing. Example: A Kenyan SME compares two equipment leases — one at 16% per annum from a bank and another at 22% from a microfinance institution. On a KES 500,000 lease over 2 years, the 6% difference amounts to KES 60,000 in extra cost.