Three sectors got more than half of fresh loans last year

GRAPHIC | GENNEVIEVE AWINO | NMG    

By TIMOTHY ODINGA More by this Author

Three sectors accounted for 54 percent of net credit advanced by commercial banks to the private sector.

Data published by the Central Bank of Kenya shows that manufacturers were the biggest winners in the credit race last year, adding their loans by Sh110 billion.

Trade and finance sectors added their stock of loans by Sh77 billion and Sh71.1 billion last year, wrapping up the top three biggest sectors in new funding.

The preference for these sectors comes amidst mixed performance in economic output over the first three quarters of last year.

The manufacturing sector posted a dismal performance, expanding by a meagre two percent compared to three percent over the same period in 2022. Trade and finance grew by 4.9 percent and 11.33 percent in the nine months.

Overall, trade had the biggest share of outstanding credit at Sh663 billion representing 17 percent of the industry’s total funding to private entities.

Agriculture, Kenya’s biggest sector by output and employment reported a 23.4 percent (Sh26.9 billion) in funding. Despite the sector being critical in the country’s survival its Sh143.3 billion credit accounts for a paltry four percent of the bank’s loan book.

The low penetration of formal credit to Agriculture has largely been attributed to it being informal, changing and highly unpredictable weather patterns, among others.

Over the year outstanding credit to the private sector increased by a record Sh477.7 billion to close the year at Sh3.912 trillion.

The year-on-year growth of 13.9 percent represents the biggest jump in private sector credit growth in 17 months coming despite increased loan rates and high competition from government borrowing.

Average loan rates have been pushed upwards by a revision of the Central Bank rate to the current 13 percent compounded by risk-based pricing.

Credit to the national government stood at Sh2.2 trillion, representing 36 percent of the industry’s credit while county governments and parastatals had Sh101 billion outstanding loans.

The remarkable growth in credit has been followed by a record rise in bad loans growing by 28 percent last year to Sh621.3 billion.

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