Variable Rate

An interest rate that can change over the course of a loan or lease, typically tied to a benchmark rate like the Central Bank Rate. Example: A Nairobi manufacturer takes a variable-rate equipment lease pegged at CBR + 5%. When the Central Bank Rate drops from 12% to 10%, her effective rate falls from 17% to 15%, saving KES 8,000 per month. But the reverse is also true — if rates rise, so do her payments.