This archive report was first published on 25 July 2019.
On July 25, 2019, the Central Bank of Kenya (CBK) Governor, Dr. Patrick Njoroge, attributed the slow credit growth in the private sector to a lack of innovation.
However, financial experts point to a different issue - domestic borrowing by the government and the rate cap law introduced in 2016.
According to data from the Kenya National Bureau of Statistics, loan advancement to the private sector has seen subdued growth, dropping from 12 percent annually to 4.4 percent.
The rate cap law has been blamed for the decline in lending to the private sector, which has dropped from 34 percent of GDP in 2015 to 27.8 percent in 2018.
Despite the CBK holding the signal rate at 9 percent for the last seven months, credit advanced to small and medium enterprises remains subdued.
On the other hand, lending to the public sector remains robust, with Treasury bills and bonds receiving more bids than offers.
The CBK governor has also raised concern over the rising provision of bad loans, which hit a record high of 345 billion shillings as at the end of March this year.
Real estate, manufacturing, and the retail sectors have been blamed for the increased non-performing loans, which stood at 10.4 percent during the first three months of this year, up from 9.6 percent in quarter one of 2018.
