, NAIROBI, Kenya May 15 – The demand for credit increased in most of the economic sectors in the quarter ended March 2014 compared to the quarter ended December 2013 according to the Central Bank of Kenya Credit Officer Survey Report.
The increased demand was mainly attributed to cheaper credit and availability of investment opportunities.
The highest growth in demand for credit was witnessed in building and construction at 60 percent, trade at 69 percent, and personal/household sectors at 59 percent.
“Forty three percent of the respondents attributed the rise in demand for credit reported in the quarter ended March 31, 2014 to increased availability of investment opportunities. 35 percent attributed it to lower cost of borrowing while 33 percent attributed it to retention of CBR (Central Bank Rate),” the report states.
Energy and water, tourism as well as real estate reported demand reduction for credit while the mining sector remained unchanged attributed to the wait-and-see attitude as investors await the outcome of the ongoing reforms in the mining sector including enactment of the Mining Bill currently before Parliament.
Respondents, who reported decreased credit demand attributed this to availability of alternative finance from other banks (37 percent), finance from non-banks (33 percent) and political risks (21 percent).
“The issuance of debt, internal financing and equity securities were cited by 83 percent, 81 percent and 73 percent of respondents respectively, as having had the least influence on the demand for credit during the quarter under review,” the report indicates.
Credit standards remained substantially unchanged for all economic sectors in the period under review with access to credit for the tourism sector tightened where access to credit has been eased in the trade sector.
The report indicates that the trade and personal/household sectors are expected to witness the greatest recovery efforts in the second quarter of 2014, with 68 percent and 61 percent of respondents respectively, predicting a step-up of efforts in this regard.
This is followed by the building, transport, agriculture and real estate sectors as indicated by 58 percent, 56 percent, 54 percent and 52 percent of the respondents respectively.
“The intensified recovery efforts in the agriculture, tourism and real estate sectors are in line with the banks expectations that loan defaults in these sectors will rise during the quarter. Banks cite forecasted low rains and new transport regulations for the banks expectation to intensify recovery in the agriculture and transport sectors,” the report says.
The Kenyan banking sector recorded an 18.4 percent pre-tax growth to Sh33.4 billion in the quarter under review, compared to the fourth quarter at Sh28.2 billion as at December 31, 2013.
The total assets increased by 3.3 percent from Sh2.73 trillion in December 2013 to Sh2.82 trillion in March 2014 while gross loans and advances grew by 5.6 percent from Sh1.60 trillion in December 2013 to Sh1.69 trillion in March 2014.
Banking sector deposits increased by 2.5 percent from Sh1.98 trillion in December 2013 to Sh2.03 trillion in March 2014.
Total shareholders’ funds increased by 5.11 percent from Sh431.49 billion in December 2013 to Sh453.61 billion in March 2014.