Borrowers spared high rates, again

The Central Bank’s rate-setting committee has spared borrowers a hike in interest on loans for the ninth month straight.

The regulator’s decision-making organ, the Monetary Policy Committee (MPC), yesterday left the base lending rate unchanged at nine per cent despite a further decline in credit to the private sector. The committee said there was a further decline in private sector credit at the beginning of the year to 3.0 per cent in January from an average growth of 3.4 per cent in the 12 months to February.

Central Bank Governor Patrick Njoroge, who chairs the team, said growth in private sector credit in finance and insurance stood at 13.1 per cent, consumer durables (16.2 per cent), manufacturing (7.7 per cent) and trade (6.4 per cent).

Dr Njoroge, however, said the private sector credit growth is, however, expected to strengthen this year, with the anticipated higher economic activity and improved lending to the Micro Small and Medium Enterprises (MSMEs).

“The committee stressed that interest rate caps severely constrain the formulation, conduct and effectiveness of monetary policy. Further, these interest rate caps have hampered access to credit by growth sectors, particularly MSMEs,” said Dr Njoroge in a statement after the meeting. However, businesses polled by the Central Bank say the lack of credit posses the biggest challenge to the economy this year.