Why banks could not improve lending in 2017 even if the wanted to
Kenyan Banks have shortened loan maturities to less than five years in 2017 following poorer demand from households and struggling companies.
According to the Central Bank of Kenya, credit extended to the private sector decelerating from 5.5 percent in the year to December 2016 to 2.2 percent in the year to December 2017.
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The decline in credit growth is attributed to both supply and demand-side factors. Demand-side factors include; low household demand for credit and weak corporate sector balance sheets as well as cash flow problems that faced many companies.
On the supply side, banks took precautionary measures and tightened their lending standards to minimize further exposures to the private sector.
The gross non-performing loans (NPLs) as a ratio of gross loans increased from 9.3 percent in December 2016 to 11.0 percent in December 2017.
Despite the gloom loans and other assets grew by 8.1 percent.
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