Banks to increase lending this quarter as economy recovers, says CBK

Kenyan banks are expected to increase their loan offerings over the next two months, a new Central Bank of Kenya (CBK) report says. 

This is on the back of a projected economic recovery and stronger balance sheets. 

However, it will not be a walk in the park for borrowers as most banks have adopted a tight credit risk appraisal, ensuring that facilities are well secured and that alternative sources of repayment are available, according to the study published yesterday.

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“With the improved liquidity, it is expected that in the first quarter of 2023, credit to the private sector will increase as several banks intend to deploy the additional liquidity towards lending to the private sector,” says CBK.

The private sector will take 33 per cent of the lending while banks will invest in Treasury Bills (22 per cent), Treasury Bonds (20 per cent), interbank lending (18 per cent), CBK liquidity management through repos (5 per cent), and increase their cash holdings (2 per cent), says the survey.

Gross loans increased by 2.3 per cent from Sh3.56 trillion in September 2022 to Sh3.7 trillion in December 2022, CBK data shows.

The increase in gross loans was largely witnessed in the manufacturing, personal and household, and real estate sectors.

The increase in gross loans was mainly due to increased credit granted for working capital purposes, and loans granted to individual borrowers.

For the quarter ending March 31, 2023, banks are, however, expected to intensify their credit recovery efforts setting up thousands of borrowers for property seizures.

The intensified recovery efforts are aimed at improving the overall quality of the asset portfolio.

“For the quarter ended March 31, 2023, banks expect to intensify their credit recovery efforts in eight economic sectors and retain them in three sectors (mining and quarrying, energy and water, and financial services),” says the survey.

“The intensified recovery efforts are aimed at improving the overall quality of the asset portfolio.”

Some of those sectors faced with aggressive collection tactics from banks include personal and household, trade, manufacturing, transport and communication, building and construction and real estate.