On Monday, the MPC said private sector credit had grown by 6.3 percent in the year to August, compared to 6.1 percent in July.
The credit growth remained well below the central bank’s target rate of 12-15 percent, a growth adequate to support economic development.
Central Bank of Kenya (CBK) has shrugged off heightened global uncertainties to retain its benchmark lending rate at 9.0 percent for the eighth time in a row, sparing borrowers higher cost of loans.
The Monetary Policy Committee (MPC) cited macroeconomic stability and optimism on growth prospects for its decision adding that inflation expectations were also within the target range in an “economy operating close to its potential.”
“The Committee also noted the prospective tightening of fiscal policy which would provide scope for accommodative monetary policy in the near term,” CBK Governor Patrick Njoroge said in a statement following Monday’s MPC meeting.
“Nevertheless, there is need to remain vigilant on the possible effects of the increased uncertainties in the external environment.”
Kenya, which earns slightly over half a trillion shillings from exports and relies heavily on oil imports has its economy exposed to heightened global uncertainties and volatility in international markets.
On Monday, the MPC said private sector credit had grown by 6.3 percent in the year to August, compared to 6.1 percent in July.
The credit growth remained well below the central bank’s target rate of 12-15 percent, a growth adequate to support economic development.
The Committee also noted that lending to the trade, manufacturing, consumer durables, private households and finance and insurance sectors grew 8.4 percent, 7.5 percent, 23.0 percent, 8.6 percent respectively.
“The uptake of credit particularly by Micro, Small and Medium Enterprises (MSMEs) is expected to increase as innovative new credit products in the banking sector become fully deployed,” said Dr Njoroge.
“Credit uptake will also be supported by ongoing reforms in the banking sector to strengthen the credit information sharing mechanism and promote transparency in pricing,” hea added.
The MPC decision comes against the backdrop of sustained sentiment by Treasury and the regulator that Kenya’s decision to peg interest rate cap on its base lending rate has constricted private sector credit.
Bankers say the cap limiting commercial lending rates to four percentage points above the benchmark has forced them to cut back on loans to high-risk groups. Normal bank lending is capped at 13 per cent.
The Finance and National Planning Committee has, however, rejected Treasury’s request to scrap the cap and want the law rewritten “more clearly.”
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