Private sector credit growth jumps to near five-year high

CBK governor Patrick Njoroge. FILE PHOTO | NMG

By CHARLES MWANIKI
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Summary

• Credit to the private sector grew at its fastest pace in four-and-a-half years in January, reflecting the continuing recovery of the economy from the Covid-19 induced slowdown of 2020.
• The Central Bank of Kenya (CBK) said in its monthly economic indicators report for January that private sector credit grew at an annualised rate of 9.3 per cent during the month, the highest since June 2016.

Credit to the private sector grew at its fastest pace in four-and-a-half years in January, reflecting the continuing recovery of the economy from the Covid-19 induced slowdown of 2020.

The Central Bank of Kenya (CBK) said in its monthly economic indicators report for January that private sector credit grew at an annualised rate of 9.3 per cent during the month, the highest since June 2016.

The highest growth was recorded on the consumer durables segment at 18.7 per cent, with loans to agriculture, transport and communications, manufacturing and finance and insurance also recording double digit annual growth.

This growth bodes well for the economy, which has in recent years been hurt by sub-optimal access to credit from banks, which have found it easier to lend to government.

Speaking in January, CBK governor Patrick Njoroge said there were signs of a revival in lending to SMEs, partly due to the operationalisation of the credit guarantee scheme for such borrowers.

He added that the close interaction between banks and their customers during the pandemic—when more than half of the loan book was renegotiated—would unlock credit as banks would now be able to price credit in accordance to individual customers’ circumstances instead of the previous method of a blanket risk allocation.

“Most banks have been making progress in new products and have also put in new energy in their relationship with SMEs…they have realised that going forward, the game in town is SMEs,” said Dr Njoroge in January.

Analysts, however warn that headwinds remain in the credit market, particularly due to concerns over the elevated non-performing loans whose ratio to the total loan book stood at 14.1 per cent in December 2020.