CBK sees growth in private sector demand for credit

Whereas credit extended to the private sector decreased marginally to 17.3 per cent in the year to May 2010 from 17.9 per cent in the year to May 2009, it accounted for 74.5 per cent of total lending by banks by end of May.

According to the CBK report; trade, private households, and transport were the leading borrowers.

For instance, trade, private households, manufacturing, and real estate received Sh127.2 billion, Sh121 billion, Sh95.9 billion and Sh70.1 billion respectively between January and end of May.

Heavily focus

Other sectors such as business services received Sh71.3 billion, consumerables Sh52 billion, building and construction Sh33.7 billion, agriculture Sh38 billion, and finance and insurance Sh25.1 billion.

However, the report notes that banks have continued to heavily focus on government securities due to their risk free status.

With the prevailing low interest rates, financial analyst said that such investment will aid growth of private credit.

“Commercial banks cannot continue on the path of negative rate of return hence will focus on private lending where they can obtain better returns,” said Einstein Kihanda, a fund manager with Sanlam Fund Management.