Banks up lending to â€˜riskyâ€™ borrowers
SEE ALSO :Private sector activity jumps in JuneThis was an increase of seven per cent compared to the third quarter of 2017 when credit to individuals stood at Sh617 billion, an indicator that banks are getting used to the continued existence of interest rate cap and lending to a sector they have described as risky. However, total banking sector lending during this period grew at a slower rate of 1.8 per cent, to Sh2.53 trillion from Sh2.49 trillion in the second quarter. Lending to financial services and energy and water sectors, on the other hand, declined by 2.2 per cent and 1.9 per cent respectively. Credit extension to the real estate sector plateaued at 0.03 per cent. Jibran Qureishi, the regional East Africa economist at Stanbic Bank, said the four per cent growth in credit to individuals during this period - which has since averaged 5.5 per cent between September 2018 and January 2019 - is “very uninspiring.” “Historically we have done as high as 25 per cent,” said Qureishi. He explained that banks had to put money where there was the least risk. Those who received credit from lenders, according to Mr Qureishi, were most likely less risky. “The question is: What if the rate cap wasn’t there? It (credit to individuals) would have been more spectacular,” he explained. In its 19th edition of Kenya Economic Update, the World Bank intensified its assault against the interest controls introduced in 2016, calling for their repeal so as to easily price loans for risky small and medium enterprises (SMEs) and individuals.
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