, NAIROBI, Kenya, Jun 25 – The Central Bank of Kenya (CBK) has asked commercial banks and other market players to amend their product pricing models in order to foster credit growth, encourage savings and thereby support government effort towards economic progress.
CBK’s Deputy Governor Haron Sirima said that the banking industry needs to narrow the interest rate spread (the difference between borrowing and lending rates).
“The huge gap indicates that bank products are only accessible to a limited number of people,” he said, but observed that the banking sector is sound and stable.
He announced that the sector’s assets increased by 16 percent from Sh2.2 trillion in May 2012 to Sh2.5 trillion at the end of May 2013 reflecting banks’ expansion of their loan books.
Deposits increased by 15 percent from Sh1.6 trillion in May 2012 to Sh1.9 trillion at the end of May 2013 on the back of deposit mobilisation and expansion of branch networks.
“The Capital Adequacy Ratio (ratio of a bank’s capital to its risk) stood at 23.5 percent at end of May 2013, well above the statutory minimum of 12 percent, this is an indicator that the sector has a comfortable cushion against unexpected shocks,” he announced.
He revealed that the number of bank branches at the end of May 2013 stood at 1,272 an increase of 98 branches from the corresponding period in 2012.
Similarly, the number of agents increased from 10,066 to 18,397 over the same period.
He said that sound standards and practices in the sector will enhance the quality of information available to investors, depositors, regulators and other market participants hence increase the sectors growth.
The Central Bank of Kenya has gradually eased monetary policy in line with inflationary expectation.
Inflation bottomed out in December 2012, and reached 4.05 percent in May, remaining below the five percent target for eight consecutive months.
Sirima reported that Kenya’s external position remains solid with international reserves above Sh498.8 billion (4.3 months of projected imports) while exchange rate has stabilized within a narrow range at Sh84.85 to the US dollar.
“These provide reason for a promising 2013. Going forward, monetary policy will continue to aim at a low and stable price environment supportive of economic growth,” he said.
He asked the banking institutions to work together to remove the binding constraints in the sector.