Trade, Homes Lead Demand For New Loans

 By Kepha Muiruri For Citizen Digital

The trade sector and households are leading the demand for new loans as the economy turns a corner from the effects of the COVID-19 pandemic.

This is according to the Central Bank of Kenya (CBK) Credit Officer Survey covering three months to December 2021.

According to the survey which elicited responses from senior credit officers in 38 licensed commercial banks and one mortgage lender, trade, personal and household sectors topped the returning demand for credit at 67 and 60 per cent respectively.

The rebounding demand has been attributed to available investment opportunities, the relative flat cost of borrowing and the retention of the Central Bank Rate (CBR).

Further, the credit demand has been anchored on largely unchanged credit standards based on positive expectations regarding general economic activity.

The increased demand for credit has seen private sector credit growth hit 8.6 per cent as of the end of 2021 compared to 7.8 per cent in October.

Banks' strong liquidity and capital adequacy levels has also firmed up lending with the ratio of non-performing loans (NPLs) expected to fall further on improved recovery efforts allowing lenders to drop provisions on bad loans.

44 per cent of respondents to the survey said they expected NPLs to fall in the quarter to the end of March 2022 with only 15 per cent of respondents anticipating the reverse.

“The fall in NPLs is attributed to enhanced recovery efforts being implemented by most banks. The intensified recovery efforts are aimed at improving the overall quality of the asset portfolio,” noted the survey.

During the quarter to December, the ratio of NPLs to gross loans fell to 13.1 per cent from 13.6 per cent in September.

At the same time, gross loans in the period rose by 1.7 per cent to Ksh.3.249 trillion from Ksh.3.193 trillion.