Trade and manufacturing were the biggest gainers in loans to the private sector, according to data from the Central Bank of Kenya (CBK).
The latest financial stability report shows these sectors were most attractive to lenders with trade accounting for 17.1 percent and manufacturing accounting for 15.2 percent of the industry’s loan book in the year to June.
Households took 14.9 percent of the loans while real estate accounted for 12.7 percent of the private sector credit in the period under review.
“The economic sectors most attractive to lenders included manufacturing, trade, households, transport and communications and real estate,” the report read in part.
The CBK’s data did not show the value of the loans outstanding as of June but the figure stood at Sh3.21 trillion as of May.
This indicates that manufacturing has received more than Sh488 billion in loans cumulatively while trade and real estate got Sh549 billion and 407.7 billion respectively. Lending to households on the other hand was in excess of Sh478 billion.
“Low and stable interest rates have supported growth in private sector credit through increased bank lending, and enabled the government to issue domestic debt at low rates,” the report read in part.
Lending to the private sector had increased to Sh3.21 trillion in the 12 months to May, up from Sh2.86 trillion a year earlier.
“Credit to the private sector recorded double-digit growth for the first time in the first quarter of 2022 in close to five years,” says the report.
“This reflects a change in the law that reversed interest rate controls in November 2019, economic recovery following the easing of Covid-19 restrictions, and a conducive policy environment.”
Bank lending to the manufacturing sector was amid various challenges including global shortages of supplies owing to the Covid-19 pandemic and the Ukrainian war.
However, the sector recorded a growth of 3.7 percent in the first quarter compared to an expansion of 2.1 percent in the corresponding quarter of 2021, according to data from the Kenya National Bureau of Statistics. The trade sector grew by 8.7 percent compared to 8.5 a year earlier.
Most industries have recorded significant growth starting last year, marking a recovery from a mix of slowdown and contraction seen in 2020 when the impact of the pandemic was most severe.
Economic activities suffered from measures — including travel restrictions, closure of schools and reduced business operating hours — that were implemented to curb the spread of Covid-19.
Banks are expected to lend more to the private sector once they are able to freely price loans based on a customer’s risk profile.
Following the removal of rate caps, banks were required to submit their frameworks for their risk-based loan pricing. Some banks have received approval for their models.