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Banks Extend More Loans To Customers As Economic Recovery Continues, NPLs Reduce

Banks are lending more to customers/Courtesy photo

The value of credit approved by banks for disbursement in December 2022 amounted to Shs1.58 trillion, an increase from Shs 1.139 trillion the previous month, Ministry of Finance’s Performance of the Economy Monthly Report for January 2023, says.

“This represents an approval rate of 77.6% in comparison to 50.4% in November 2022, partly due to lower risk associated with lending reflected by the decline in NPLs and the pick-up in economic activity (reflected by improvements in the indicators of economic activity),” the report says.

It adds that in December 2022, Building, Mortgage, Construction and Real Estate accounted for the largest share of credit approved at 32.1% (Shs. 508.5 billion), up from an approval rate of 11.7% the previous month. Other notable recipients of credit included Trade at Shs. 282.3 billion (17.8%), Personal and Household Loans at Shs. 271.8 billion (17.1%), Manufacturing at Shs 107.3 billion (6.8%), Mining and Quarrying at Shs. 179.8 billion (11.3%) and Business, Community, Social and other Services at Shs. 115.2 billion (7.3%).

“These six sectors constituted 92.4% of all the credit extended to the private sector during the month,” the report says.

The report adds that the stock of total outstanding Private Sector Credit grew by 1.3% to Shs 20.15 trillion in December 2022 from Shs. 19.88 trillion in November 2022, with increases recorded for both Shilling and foreign currency denominated credit.

According to the report, Shilling and foreign currency denominated credit rose to Shs 14.07 trillion and Shs. 6.07 trillion, respectively in December 2022 from Shs 13.94 trillion and Shs. 5.93 trillion, respectively in November 2022.

“This was in part due to the declining lending rates and NPLs all of which contributed to more credit extensions to the private sector,” the report says.

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