Lending to key sectors rebound as banks express optimism

Banks have increased lending to key private sector institutions, citing optimism on the future.

According to a CBK Private Sector Market Perception Survey conducted in January, more than 90 per cent of the respondents were optimistic about prospects for 2018, compared to 65 per cent in November 2017.

This was even as the Monetary Policy Committee (MPC) retained the benchmark lending rate at 10 per cent for the 16th consecutive month, anchored on reduced inflation pressure and optimism.

“Respondents attributed their optimism to a stable macroeconomic environment, improved business environment and investor confidence, public investment in infrastructure, and expected commencement of direct flights to the US,” noted CBK.

CBK yesterday said private sector credit grew by 2.4 per cent in the 12 months to December 2017, slightly higher than the two per cent recorded in October 2017.

Reduced risks

In November, it grew by 2.7 per cent. The latest growth is however skewed to a few sectors where banks see low risks. According to CBK Governor Patrick Njoroge, manufacturing sector was the biggest beneficiary, registering a credit growth of 13 per cent.

This was followed by domestic trade and real estate sectors with a growth of 10.5 per cent and 8.6 per cent respectively.

He described the sector as stable and resilient despite the ratio of gross non-performing loans to gross loans remaining unchanged at 10.6 per cent late last year.

“Preliminary data for 2017 showed good performance in the sector, notwithstanding an expected decline in profitability,” said Njoroge. He said the MPC continued to monitor the impact of interest rate caps on the effective transmission of monetary policy.