The Central Bank of Kenya (CBK) has forecast significant growth in the economy and lending to the private sector this year in the wake of the scrapping of the interest rate cap.
CBK Governor Patrick Njoroge yesterday predicted a Gross Domestic Product (GDP) growth of 6.2 per cent, up from 5.7 per cent last year, also backed by a recovery in agriculture and medium and small businesses.
“We project 2020 (growth) to be around 6.2 per cent. Frankly, this is a very benign baseline,” he said. Dr Njoroge spoke at a Press briefing in his office a day after the Monetary Policy Committee (MPC) slashed the benchmark lending rate by 0.25 percentage points from 8.50 per cent, signalling cheaper loans. The CBK governor reiterated his warning to banks against “predatory lending” and urged for patience as lenders search for a proper pricing model for their loans.
“We’ve done a lot in ensuring that banks offer interest rates at an affordable rate. As for the predatory lending, just wait… we’ve made that point before because things are bad… it’s amazing that these online lenders still think they can get away with it,” he said.
Following the scrapping of the rate cap last November, private sector credit growth is expected to go up by 4.7 per cent this year to 11.8 per cent from 7.1 per cent in 2019.
Njoroge said concerns raised in various key sectors such as agriculture, however need to be addressed as well as giving incentives to small and medium-sized businesses.
“The issue for us has always been implementation. If we implement things correctly then you can see a substantial improvement in the sectors and that would obviously lead to a significant increase in the GDP,” he said. Standard Chartered Chief Economist for Africa and the Middle East Razia Khan said the easing of the Central Bank Rate had come as a surprise soon after the recent cut in November.