Credit growth to Kenya's private sector slowing down: central bank

The Central Bank of Kenya (CBK) said on Wednesday that the growth of credit to the private sector is slowing down.

CBK Governor Dr Patrick Njoroge told journalists in Nairobi that in June 2015 credit to the private sector grew by 18 percent but has slowed down to seven percent by end of June 2016.

"We suspect that one of the reasons is because the private sector prefers to get credit from other sources other than banks," Njoroge said.

"We have been monitoring the growth of credit and we expected to see an annual growth of between 12 to 15 percent," he said. He noted that a slowdown in credit normally indicates that overall economic growth is also slowing.

"We don't think that Kenya is experiencing an economic slowdown because all indicators should that economic growth is accelerating," he said.

According to the CBK, the banks are also experiencing an increase in the percentage of non performing loans. "This is related to the lethargic growth in private sector credit," Njoroge said.

The governor noted that despite the temporary ban on licensing of new banks, they have received interest from at least eight international banks wishing to set up base in Kenya.

"This is because of Kenya's well developed financial sector that make it a regional hub for east and central Africa," he said.

Regarding the effects of the recently passed interest rate capping law, the CBK said that it will affect monetary policies of the country.

Njoroge said that risky borrowers could be cut off from accessing loans from formal financial institutions. Endit