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Banks expect to lend more in 2019 but no jobs growth: CBK survey

A market perception survey conducted by the Central Bank’s Monetary Policy Committee showed that banks expect a stable macroeconomic environment in 2019

NAIROBI, Kenya, Feb 13 – Commercial banks project to increase lending in 2019 despite the existing environment of interest rate capping.

A market perception survey conducted by the Central Bank’s Monetary Policy Committee showed that banks expect a stable macroeconomic environment and increased economic activity to fuel credit growth.

For the first two months of 2019, Banks said they will lend more due to lower interest rates and consumer borrowing to fund education-related needs.

“Optimism by Micro Small and Medium Enterprises (MSMEs) about investing in Big 4 related projects and expected demand for loans by farmers in February to prepare for the long rains planting season,” will also propel private sector credit, said the survey.

According to the Survey, banks said the removal of deposit rates cap has lessened the strain on the cost of funds for banks but, “interest rate capping and the resultant inability to effectively price risk continues to constrain the supply of credit as lenders diversify their portfolio to higher income and lower risk investments.”

While non-bank private sector firms see economic growth in 2019 resulting in more jobs, the digitization of financial services will see a depressed market for job seekers in the banking sector.

According to banks, interest capping law has also reduced the need to employ credit officers sub-sectors where the bank is unable to price risk

Banks also expect the exchange rate of the shilling against the US dollar to remain stable in the year supported by sufficient foreign exchange reserves, relatively low oil prices, higher horticulture inflows and diaspora remittances.

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