Commercial banks had borrowed a cumulative Sh90.4 billion from each other using their government securities as collateral between the start of the year and July 4, pointing to liquidity challenges for some lenders despite muted growth in lending to customers.
Liquidity distribution in the banking sector has in recent years been skewed in favour of large lenders, partly reflecting their ability to gather cheaper deposits at scale, and the lingering effect of the flight to safety by customers of small banks were spooked by the collapse of three smaller lenders in 2015 and 2016.
