Businesses risk defaults, receivership as CBK raises rates
Businesses in Kenya are facing a decline in credit and increased loan defaults even as the Central Bank of Kenya (CBK) raises rates, a move that could make the precarious situation even worse.
According to the CBK, credit to the private sector declined to 11.7 percent in February compared to 12.7 percent in December.
The regulator said during the review period, default rates increased from 13.3 percent to 14 percent.
As the CBK raised rates aggressively to 9.5 percent, banks will make their loans more expensive further tightening private sector loans and in turn hit economic activity.
Expensive credit will also mean higher defaults for companies already struggling to meet debt repayments amidst subdued demand for their products, ushering in a round of receiverships and company shutdowns.