Markets & Finance

Private sector credit expansion overshoots CBK target at 21 pc

cbk

The Central Bank of Kenya building in Nairobi. PHOTO | FILE

Credit to the private sector expanded 21 per cent in the year to August, slightly higher than the target of 19.7 per cent set by the Central Bank of Kenya (CBK).

As at the end August, the total credit to the private sector stood at Sh2.15 trillion compared to Sh1.78 trillion the same time last year. This represents an increase of Sh373 billion in 12 months.

The largest growth – 50.5 per cent – was in the credit to the financial and insurance sector. The sector saw its loans move up to Sh58.3 billion in August from Sh38.7 billion in the same month last year.

The pace of the build-up in credit to the private sector this year was, however, slower than last year’s when it stood at 24.5 per cent – an indication that the regulator has been keen to put a lid on any inflationary pressure coming from the money supply side.

“The robust growth in domestic credit largely reflects an increase in credit to government. In the period under review, growth in credit to the private sector declined to 21.0 per cent from 24.5 per cent recorded the previous year,” said the CBK in its latest monthly report.

In total, domestic credit – including to the private sector, the government and parastatals – totalled Sh2.78 trillion, having risen by 26.9 per cent in the course of the year to August.

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The second largest beneficiary of the increased credit was the transport and communications sector, which saw its loans rise by 30 per cent to Sh153.5 billion in August.

The third largest upward change in the proportion of loans advanced was to the agricultural sector, which received Sh90.3 billion in August against Sh70.1 billion the same time last year.

Mining and quarrying saw a negative growth in loans, which fell by 18 per cent to Sh23 billion from Sh28 billion in the same month last year, indicating a reduction in reliance on banks in the sector.

In the oil and gas sector, for example, operators have been relying on selling shares and private placements in their home countries to raise funds.

For the loans to the real-estate sector, the pace of growth slackened at 15 per cent in August compared to 29.4 per cent in the same month last year, showing that there was a slowdown in activity in the sector by half.

The CBK expects loans will continue growing for the rest of the year, with the targets of 19.1 in September, 19 per cent in October, 18.6 per cent in November and and 18.4 per cent in December.