Kenyan Credit Growth Accelerates for First Time in Two Years

NAIROBI (Capital Markets in Africa) – Lending to Kenya’s private sector accelerated in August for the first time in two years, after growing at the weakest pace since 2002 the month before as banks continued to shun borrowers because of a government-imposed interest-rate cap.

Credit grew 1.6 percent in August from a year earlier, compared with 1.4 percent in July, the Central Bank of Kenya said in an emailed statement. The bank kept its benchmark interest rate unchanged at 10 percent, according to the statement.

The growth in credit last month ended a downward trend that began in August 2015, the bank said. “Energy and water, agriculture and personal/household sectors recorded the largest increases in gross loans between June and August,” it said.

Kenyan President Uhuru Kenyatta introduced a cap on bank lending rates in August 2016 to spur access to credit in East Africa’s biggest economy. The move, which limited bank charges on loans to 400 basis points above the central bank’s rate, exacerbated dwindling private sector credit that was already slowing because of tighter industry regulations and the collapse of three lenders in eight months.

The central bank said it welcomed the preliminary results of studies on the slowdown in credit provision and the impact the rate caps have had, without providing further details.

Source: Bloomberg Business News