Why non- performing loans are still a problem in the banking sector

Habul Olaka CEO, Kenya Bankers Association

The Kenya Bankers Association (KBA) has raised concerns over increased cases of non-performing loans in the banking sector.

According to a report released by the association, non-performing loans have been ballooning in the recent past up from 5.6% in 2014 to 12% in 2018.

Speaking during the launch of the KBA strategic plan for 2019, the CEO Habil Olaka said the current state of affairs is affecting the sector’s growth. The report further indicates that credit growth has been suppressed over the years majorly due to the introduction of interest rate capping.

“The volume of non-performing loans poses a sustainability challenge. To address these challenge, the industry continues to engage stakeholders in pursuit of long term solutions for issues such as high cost of credit and promoting access to SMEs. In this effort, we acknowledge that introduction of interest caps is a major contributor to a strained microeconomic environment.” Said Mr. Olaka

The banking sector’s deposits grew from Ksh2.5 trillion to Ksh3.4 trillion by May 2019. Assets on the other hand grew to Ksh4.6 trillion from Ksh3.9 trillion.

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Lawrence Baraza is a prolific writer with competencies in Digital Media, Print, and Broadcast. Baraza is also a Communication Practitioner currently spearheading Digital content on Metropol TV's Digital Desk.

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