Private sector lending to increase on improved liquidity-CBK

NAIROBI, Kenya Feb 21-Most banks expect to lend more to the private sector in the first quarter of 2022 as a result of improved liquidity, a new survey by the Central bank of Kenya has revealed.

According to the latest Central Bank of Kenya’s Credit Officer Survey, majority of respondents (28 per cent) said they would lend to the private sector as a result of the improved liquidity.

Further, other respondents said they would deploy the additional liquidity towards investing in Treasury Bonds (23 per cent), investing in Treasury Bills (20 per cent), interbank lending (17 per cent) and CBK liquidity management through repos (7 per cent).

“During the quarter ended December 2021, 77 percent of the respondents indicated that their liquidity position had improved,” said CBK.

According to CBK, liquidity improved mainly as a result of increased deposits (53 per cent), loan recovery (30 per cent), maturity of government securities (12 per cent) and capital injection (5 per cent).

During the quarter under review, total deposits increased by 2.2 per cent from Sh4.34trillion in September 2021, to Sh4.44trillion in December 2021.

The asset quality of banks, measured by gross nonperforming loans to gross loans ratio improved from 13.6 per cent in September 2021, to 13.1 per cent in December 2021.

This was attributed to a 2.0 per cent decrease in non-performing loans and a 1.7 per cent increase in gross loans.

Lending by commercial banks to companies and individuals increased the highest since February last year in December pointing to economic recovery from the coronavirus economic crisis, data from CBK shows.

During the last Monetary Policy Meeting, CBK Governor Patrick Njoroge said private sector credit grew by 8.6 percent in the year to December compared to 7.8 percent in October, the highest since February 2021 highlighting increased business activity in various sectors.