By Ronald Njoroge NAIROBI (Xinhua)
-- Kenya’s credit growth has
slowed down to 4 percent per month in 2017 down from 18
percent in 2016 as a result of the interest-capping law,
the banking industry umbrella body said Wednesday.
Bankers Association (KBA) CEO Habil Olaka told a media
briefing that the law has made lending to small and
medium enterprises too risky for commercial banks.
forward the growth in credit is likely to shrink even
further and this could have grave consequences for the
economy,” Olaka said.
shrinking of credit especially to micro borrowers and
small and medium enterprises is a concern for us, as
this is the segment where Kenya depends on, for
employment creation and sustainable economic growth,” he
The law came
into force in September 2016 to cap the interest rates
charged by commercial banks to no higher than 4 percent
above the Central Bank Rate (CBR) and require paying
depositors at least 70 percent of the CBR.
law was operational, commercial banks provided loans at
an average rate of 20 percent but currently the maximum
rate allowed is 14 percent.
that the expectations that households and businesses
would flock to banks to access cheap credit has not
that currently loans disbursement is concentrated on the
household, trade, manufacturing, building and
construction sectors, all of which accounts for 70
percent of the credit market.
credit to the private sector was already on a downward
trend even before the enactment of the law.
the interest rate capping law introduced in the volatile
market worsened the credit conditions,” he said.