Study: Kenyans took Sh2trn loans in 2014
A Co-operative Bank ATM lobby. Kenyans borrowed Sh370 billion more last year compared to 2013, with the Central Bank of Kenya (CBK) attributing this to declining cost of credit. FILE PHOTO |
What you need to know:
- CBK said demand for credit was driven by lower cost of borrowing, increased investment opportunities and retention of the benchmark lending rate at 8.5 per cent.
- Unaudited pre-tax profits for banks at the end of last year, however, registered a much slower growth of 13.7 per cent to Sh141 billion compared to Sh124 billion for 2013.
- According to Old Mutual market analyst Eric Munywoki, a gradual decline in interest rates in the past two years has seen loans uptake increase, but this is expected to see interest income decline.
Kenyans borrowed Sh370 billion more last year compared to 2013, with the Central Bank of Kenya (CBK) attributing this to declining cost of credit.
According to the regulator’s credit officer survey for 2014, the total value of loans issued by banks stood at Sh1.97 trillion at the end of last year, a 23 per cent growth from Sh1.6 trillion at the end of 2013.
CBK said demand for credit was driven by lower cost of borrowing, increased investment opportunities and retention of the benchmark lending rate at 8.5 per cent.
“The main factors that caused the demand for credit to increase were internal financing, loans from other banks, drop in cost of borrowing, increased available investment opportunities as a result of a stable macroeconomic environment, KBRR and the retention of CBR at 8.5 per cent,” the CBK said.
Unaudited pre-tax profits for banks at the end of last year, however, registered a much slower growth of 13.7 per cent to Sh141 billion compared to Sh124 billion for 2013.
This is an indication of the shrinking interest income arising from gradual decline in interest rates. Banks also paid a total of Sh89.58 billion to depositors in 2014 in interest expenses, a 24 per cent rise from Sh72.22 billion in 2013.
According to Old Mutual market analyst Eric Munywoki, a gradual decline in interest rates in the past two years has seen loans uptake increase, but this is expected to see interest income decline.
“Interest rates have been declining gradually over the past two years. Most banks are now focusing on non-funded income like fees and commissions to name but a few as the only way to grow their profitability,” Mr Munywoki said.
The highest growth for loans was witnessed in the personal/household, transport and communication, agriculture and trade sectors. Some of the factors, delayed government payments to contractors and salaries to teachers due to industrial unrest, are expected to lead to increased non-performing loans in 2015.
Other risks especially in the agriculture sector, include failed or late rains expected to result to poor harvests.
