, NAIROBI, Kenya, May 11 – Demand for credit has increased in five sectors of the economy in the first quarter of 2015 that include trade at 60 percent followed by building and construction sector and Agriculture at 56 percent.
Other sectors include Personal/Household (54%) and Transport (49%) according to the Central Bank of Kenya Credit Officer Survey for January to March 2015.
Gross loans increased by 3.5 percent from Sh1.97 trillion in December 2014 to Sh2.03trillion in March 2015 with the ratio for total loans to total assets going up marginally at 59.75 percent from 59.48 percent reported in December2014.
Available investment opportunities, cost of borrowing, issuance of debt securities and equity, the Kenya Bankers Reference Rate (KBRR) and retention of CBR at 8.5 percent were the main factors that led to increased demand for credit.
“Other economic sectors led by Mining, Energy, Financial Services, Tourism, Manufacturing and Real Estate were reported to have recorded unchanged demand for credit in the period under review, “ the survey indicates.
According to the survey, banks foresee an increase in Non- Performing Loans in four sectors that include: Tourism, Personal/Households, Transport and Communication and Real Estate sectors in the second quarter of 2015.
Banks cited the current spate of insecurity in the country, travel advisories and the heightened political activity may support the expected increase in NPLs in the Tourism sector.
“The expected increase in NPLs in the Mining and Quarrying sector may be attributed to the on-going reforms in the Mining sector,” the survey stated with banks intending to increase their credit recovery efforts to improve the overall quality of their asset portfolio.
Personal/Household, Tourism, Transport and Communication as well as Trade sectors expected to witness the greatest recovery efforts followed by the Real Estate, Building and Construction sectors.
“The intensified recovery efforts in the Tourism, Building and Construction, Mining and Quarrying and Real Estate sectors are in line with the banks expectations that loan defaults in these sectors will rise during Q2 of 2015, “ the report stated.
Banks cite heightened political activity, insecurity and pending Mining Bill in parliament as reasons for them to intensify credit recovery in the Tourism, Mining and Quarrying sectors.
Delayed payments to contracts by the government may be attributed to intensified credit recovery efforts in the Building and Construction sector.
The Banking sector deposits grew by 3.4 percent from Sh2.33trillion in December 2014 to Sh2.41trillion in March 2015 while shareholders’ funds increased marginally by 0.72 percent from Sh530.09 billion in December 2014 to Sh533.9billion in March 2015.
Pre-tax profits for the banking sector stood at Sh37.3billion compared to Sh33.4 billion for 31, March 2014 recording an increase of 11.6 percent.