The number of loans accounts held by medium, small and micro enterprises (MSMEs) increased by 41.7 per cent in three years, amid scramble by lenders for a share of the key market segment.
The Central Bank of Kenya data show there were 915,155 MSME loan accounts with commercial banks and microfinance banks as at December 2020, an increase (by 269,137 loans accounts) from 646,018 loan accounts as at December 2017.
The accounts had an outstanding value of Sh638 billion, from Sh413.9 billion recorded in 2017.
“The number of accounts grew at an average of 14 per cent per annum from 2017 to 2020 while the value of loan accounts grew at an annual average of 15 per cent over the same period. This is slightly higher than the 11 per cent annual growth rate for the overall banking sector loan portfolio over the same period,’’ CBK stated in the Bank Supervision Annual Report 2020.
“The increase is attributable largely to enhanced marketing among MSMEs by commercial and microfinance banks as they compete for greater shares of the MSME market segment.”
SMEs had a higher risk rating since the introduction of interest rate cap in September 2016 that was scrapped in November 2019, hence deemed risky and locked out from borrowing.
However, banks are now increasing their lending appetite to SMEs with aggressive introduction of programmes and products targeting the sector to raise their revenues.
This has also been fueled by higher competition in the corporate and personal and household sectors.
The report also showed deposits held by MSMEs as at December amounted to Sh577.6 billion or 14.4 per cent of the total deposit liabilities for commercial banks at Sh4.01 trillion.
This was a drop from Sh585.8 billion representing 20.2 per cent of commercial banks’ total deposits at Sh2.89 trillion in the period under review.
CBK added that 204,802 of the 915,115 MSME loan accounts as at December valued at Sh98.7 billion were non-performing.