The slower growth of credit to the private sector in August as a result of businesses exercising caution due to the elections will not have come as a surprise to anyone who is familiar with Kenya’s history of political risk.
The negative effect of elections has been a recurring theme in the country since the 2007 poll dispute, which resulted in widespread violence and a near halt in economic activity.
Lending to businesses has otherwise been on an upward trend this year, which means that fundamentally, the economy is on the right path. This year, the polls passed peacefully, and as such we expect the lending to return to the earlier trend sooner.
The onus is now on the policymakers to build on this and issue clear policy guidelines that will give the private sector confidence in the economy. The national and county governments must support businesses by prioritising settlement of pending bills, which have denied firms working capital.
Banks must also play their part by increasing their lending to the private sector, especially now that their preferred risk-based loan pricing has been approved by the regulator.
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Note: The results are not exact but very close to the actual.
