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Only 4 banks increased credit to businesses in the last three months – CBK study

CBK’s Commercial Bank Credit Survey interviewed Senior Credit officers responsible for credit in all operating commercial banks/FILE

NAIROBI, Kenya, Sept 6 – Only 10 percent of Kenya’s 42 financial institutions posted an increase in credit issuance as a result of capping of interest rates in the second quarter of 2017.

This is according to a new Survey by the Central Bank of Kenya has seen banks register mixed reactions on the impact of interest rates on demand and actual credit granted.

CBK’s Commercial Bank Credit Survey, which was undertaken between April and June 2017, shows that 45 percent of the commercial banks said interest rate capping had little effect on the actual loans issued, while the other 45 percent said actual credit granted decreased.

Commercial Banks have taken a wait and see approach on how the market will react to the capping of interest rates. This trend was the same in the previous quarter,” the report states.

On demand for Credit, Interest rate capping led to increased demand for credit for 35 percent of banks who attributed this to cheaper credit.

The survey has not named the particular banks.

But half of the banks (50 percent) indicated that the demand for credit remained unchanged while 15 percent noted that demand for credit decreased.

Gross loans decreased by 0.84 percent from Sh2.38 trillion in March 2017 to Sh2.36 trillion in June 2017.

This decrease in gross loans was mainly attributable to a reduction in loans granted to support the Transport and Communication, Trade, Agricultural, Real Estate and Mining and Quarrying sectors.

The ratio of gross non-performing loans to gross loans increased from 9.5 percent in March 2017 to 9.91 percent in June 2017.

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The increase in the gross non-performing loans was mainly attributable to a challenging business environment.

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