This archive report was first published on 26 August 2020.
On August 26, 2020, the Central Bank of Kenya (CBK) released data showing that lending rates had fallen to an average of 11.89 percent in June, the lowest since the CBK started disclosing the rate in July 1991.
This marked a significant drop from previous rates and eased fears of a rise in the cost of credit after the removal of the interest rate cap last November.
However, banks are taking a cautious approach in extending fresh credit in an environment where companies and individuals are increasingly seeking moratorium on their loans in the wake of the Covid-19 pandemic.
According to Habil Olaka, CEO of Kenya Bankers Association, the pandemic has affected both the supply and demand side of the credit, leading to a slowdown in business activities and an uncertain future.
Despite the reduction in the price of credit, there has been an increase in non-performing loans, with the ratio of non-performing loans (NPLs) rising from 12.5 percent to 13.1 percent in April, the highest since August 2007.
Defaulted loans jumped to Sh379.9 billion in June from Sh349.9 billion in February, with the Sh29.95 billion increase being the largest four-month rise in recent history.
