Capital Markets

Loans to transport firms grow at record pace on travel recovery

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Public Service Vehicles ready for passengers at Tea Room Stage, Accra Road, Nairobi on Monday, December 21, 2020. PHOTO | DENNIS ONSONGO | NMG

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Summary

  • Bank lending to the transport and communication sector expanded by the largest margin of 24.1 percent in the 12 months to February to hit a record.
  • Transport and communication are among the sectors that have registered a strong rebound on easing of restrictive measures after two years of the pandemic.
  • The transportation and storage industry grew 13 percent in the third quarter, according to data from the Kenya National Bureau of Statistics (KNBS).

Bank lending to the transport and communication sector expanded by the largest margin of 24.1 percent in the 12 months to February to hit a record, reflecting improved performance on resumption of domestic and international travel.

Data from the Central Bank of Kenya (CBK) shows total loans extended to the sector as of February was Sh270.0 billion, up from Sh217.6 billion in the same month last year.

Transport and communication are among the sectors that have registered a strong rebound on easing of restrictive measures after two years of the pandemic.

The transportation and storage industry grew 13 percent in the third quarter, according to data from the Kenya National Bureau of Statistics (KNBS).

Visitor arrivals at Jomo Kenyatta International Airport, for instance, increased to 69,236 in January compared to 40,408 in a similar month last year.

Restrictions on domestic and international travel hurt airlines, tour operators and public service vehicles (PSV) investors who registered lower revenues and losses in some cases.

PSVs were also impacted by working from home trends and carrying at a half capacity to ensure social distancing rules that were removed last year.

Growth in credit to the transport and communication sector came despite banks registering significant defaults among clients active in the industries.

Bad loans in the transport sector, for instance, rose 10.8 percent or Sh4.1 billion to Sh42.2 billion last year.

The transport sector has recently come under pressure from the weakening of the shilling, fuel shortages and escalating prices of the commodity.

Prices per litre of petrol and diesel have risen to Sh144.6 and Sh125.5 in Nairobi.

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