Private sector credit growth remains generally lower than the pre-COVID 19 levels mainly on account of subdued economic activity occasioned by the lagging effects of the Covid-19 pandemic, the spill-over effects of the Russia – Ukraine war as well as the tight monetary stance by the central bank.
This is according to the recently released Ministry of Finance’s Performance Of the Economy Monthly Report for March 2023.
The report obtained by Business Focus adds that Shilling denominated lending rates increased to a weighted average of 20.24 percent in February 2023, up from 18.54 percent the previous month.
“This was on account of a tight monetary stance and end of the period of substantial borrowing by large corporate firms which are considered less risky by the commercial banks. During the month of February 2023, borrowers were mainly from manufacturing, personal loans and household loans who are charged relatively high rates,” the report says.
On the other hand, the report says, interest rates charged on foreign currency denominated credit remained relatively stable at 7.50 percent in February 2023, from 7.73 percent during January 2023.
According to the report, the value of credit approved for disbursement during February 2023 amounted to Shs1.268 trillion, an increase from Shs1.25 trillion registered the previous month. “During February 2023, personal and household loans accounted for the largest share of credit extended to the private sector at 38.0 percent (Shs 481.7 billion), this was followed by manufacturing and trade at 15.7 percent (Shs 199.0 billion) and 13.3 percent (Shs193.7 billion) respectively,” the report says.
Other notable recipients included agriculture at 10.4 percent, community, social and other services at 9.2 percent, transport, water, communication & electricity at 3.6 percent and mining and quarrying at 1.4 percent of total credit extended to the private sector.
