- Posted by: Administrator
- Category: Finance
A perception survey by the Central Bank of Kenya’s Monetary Policy Committee (MPC) reveals that commercial banks expect the settlement of pending bills by the National and County governments owed to businesses will spur the economy towards a vibrant credit environment.
The banks, however, cited their inability to effectively price risk due to the existing interest rate caps, as the most significant deterring factor to faster private sector credit growth.
While presenting the budget statement to parliament last Thursday, National Treasury Cabinet Secretary Henry Rotich announced the interest rate caps will be removed within the 2018/2019 financial year.
Rotich admitted that the interest rate ceiling has contributed to slow growth in credit to the private sector especially to micro, small & medium enterprises (MSMEs) in the agriculture and trade sectors.
“The aim of the amendment which was to expand access to financial services and increase return on savings has not been achieved since banks have shied away from borrowers they consider riskier and have priced above the maximum lending rate.
“In this regard, the Government is putting in place a package of reforms aimed at optimizing lending to the private sector while at the same time encouraging innovation in the financial sector in Kenya,” said Rotich.
The World Bank, in its Kenya Economic Update in December 2017, said a lag in credit to the private sector from 2015 was partly to blame for the country’s slowdown of economic performance.
The MPC survey, however, shows Commercial banks, microfinance banks and non-bank private sector firms say they expect higher economic growth in 2018/2019 supported by agriculture due to favourable weather conditions, continuing Government spending on infrastructure, focus on the Big 4 priority areas and growth in foreign direct investment.
SOURCE: THE STANDARD