Kenya Sees Increased Lending to Private Sector at 13.9% Despite Hiked Rates

Deposit-taking Savings and Credit Cooperatives (SACCOs) experienced significant growth in credit to both the private sector and the government.

Kenya’s commercial banks saw a notable increase in credit to the private sector, which grew by 13.9% to reach Ksh..4,078.1 billion as of December 2023, according to data from the Kenya National Bureau of Statistics (KNBS).

However, during the same period, credit extended by commercial banks to the National Government decreased by 3.6%, settling at Ksh.1,720.3 billion.

Micro-finance banks also saw shifts in their lending patterns. Total domestic credit provided by these institutions rose by 1.8% to Ksh.49.4 billion in December 2023, up from Ksh.48.6 billion in December 2022.

Lending By Micro-finance Banks

In contrast, credit to the private sector by micro-finance banks fell by 7.6%, declining to KSh.43.1 billion.

Deposit-taking Savings and Credit Cooperatives (SACCOs) experienced significant growth in credit to both the private sector and the government.

Private sector credit increased by 11.6% to Ksh.655.4 billion, while government credit surged by 33.3% to Ksh.14.2 billion as of December 2023.

Also Read: Kenya’s Private Sector Sees Robust Growth in May

These financial movements occurred amid a series of interest rate hikes by the Central Bank of Kenya (CBK).

“During the review period, the Central Bank Rate (CBR) was raised to 10.50 percent as at June 2023, and 12.50 percent as at December 2023 compared to 8.75 in December 2022.

This was necessitated by the need to address inflationary pressures occasioned by the depreciation of the Kenyan Shilling against major currencies and high global prices during the review period.

As a result, overall interest rates increased during the review period,” said KNBS in its 2024 Economic Survey.

Government Securities

The interest rate on the 91-Day Treasury bill also spiked, rising to 15.70% in December 2023 from 9.33% in December 2022. Similarly, the inter-bank rate increased to 11.65% from 5.39% over the same period.

Average interest rates on commercial bank loans and advances climbed to 14.63% in December 2023, compared to 12.67% in December 2022.

Despite these interest rate hikes, the real value of commercial banks’ deposit liabilities fell to KSh.3,674.6 billion as of December 2023.

On the other hand, the real value of total commercial bank credit expanded to KSh.4,425.9 billion, and the real value of total liabilities to the banking system grew by 12.9%, reaching KSh.5,362.6 billion by the end of 2023.

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Collins Ogutu

Nairobi based Digital Journalist, Corporate Communication Expert and Digital Marketer with a wealth of experience in multimedia. Accredited member of the Media Council of Kenya.

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