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SACCOs, MFIs catch up with banks in share of personal loans

Household private debt has flattened at approximately Sh65,000 since the rate cap was introduced in September 2016/FILE

NAIROBI, Kenya Oct 9 – SACCOs and microfinance lenders have caught up with banks and now provide half of the loans issued to private households in Kenya.

This is according to a report by ICEA LION Asset Managers which indicates that Private household and trade segments accounted for over 40 percent of total private sector lending in East Africa in the last two years.

Judd Murigi, Head of Research at ICEA LION Asset Managers says lenders in the region have a higher credit appetite for these segments, which also tend to have the largest share of SMEs, indicating financiers’ willingness to extend credit to this vital driver of regional economies.

“In Kenya, after rising steeply by 50 percent between 2013 and 2016, household private debt has flattened at approximately Sh65,000 since the rate cap was introduced in September 2016. Private debt per household is approximately one-sixth of public debt per household which stands at Sh400,000. Private and public debt per household has increased by 53 percent and 102 percent respectively over the last five years in Kenya,” he added.

Latest data from Saccos Society Regulatory Authority shows the total asset base of SACCOs grew in 2016 to reach Sh393.49 Billion, as compared to Sh342.84 Billion recorded in 2015.

This represents a 14.8 percent year on year growth rate and was funded principally by members’ deposits which also grew by a similar percentage to reach Sh272.57 Billion in 2016 from Sh237.44 Billion recorded in the previous year.

The loans and advances constituted a huge portion of the total assets, accounting for 73.42 percent of the total assets and which stood at Sh288.92 Billion in 2016 up from Sh251.08 percent in 2015. This represented a 15.1 percent year to year growth rate.

The gross loans, on the other hand, stood at Sh297.6 Billion in 2016, up from Sh258.18 Billion in 2015 representing a 15.3 per cent year to year growth rate.

According to the ICEA report, the manufacturing sector comes in second at 10 to 15pc in the region while the real estate sector got with about 13 per cent share of total private sector credit for Kenya.

“Despite being one of the sectors that are major recipients of private sector credit, the manufacturing sector has continued to record slow growth in terms of economic output, indicating that this crucial sector faces unique constraints that need to be addressed,” Murigi added.

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Murigi says Agriculture received only 5 to 7 percent of private sector credit in Kenya over the last two years.

The report indicates that not all sectors have felt the credit crunch since interest rate caps were introduced in September 2016, with credit to trade and manufacturing remaining constant at Sh40 billion to Sh50 billion in the twenty months before and after the rate cap.

However, credit flow to the real estate and private households have halved since the introduction of the rate cap, while the transport and communication sector has seen a Sh35bn decline in private sector credit flows since September 2016.

Murigi says there was also a slowdown in trade and manufacturing sector output despite the sustained availability of credit since the rate cap was introduced.

Overall private sector credit penetration is expected to decline from 35 percent of GDP in September 2016 to 25 percent of GDP by the end of 2018.

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