Commercial banks had restructured Ksh679.9 billion in loans as at the end of May accounting for 23.4 percent of the total banking sector loan book of Ksh2.9 trillion, data posted by the Central Bank of Kenya (CBK) shows.
According to Central Bank of Kenya (CBK) Governor Dr. Patrick Njoroge, the repayment period of personal/household loans amounting to Ksh199.1 billion, an equivalent of 25 percent of the gross loans to the sector, had been extended by the end of May.
Some Ksh480.6 billion had been restructured mainly to Trade (23.7 percent), Real Estate (20.6 percent), Tourism (12.5 percent), Transport and Communication (11.2 percent) and Manufacturing (10.6 percent)
Base Lending Rate
On Thursday, the Monetary Policy Committee (MPC) voted to retain the base lending rate at 7.00% citing an economy responding to CBK’s interventions, hence the freeze, the same stance adopted in the last MPC meeting at the end of May.
“The Committee noted that the package of policy measures adopted since March were having the intended effect on the economy, and will be augmented by the announced fiscal measures. The MPC concluded that the current accommodative monetary policy stance remains appropriate,” CBK Governor Dr Patrick Njoroge, for the MPC said in a statement.
The MPC noted that most recent leading indicators for the Kenyan economy point to strong growth in the first quarter of 2020 while indicators for the second quarter suggesting that the impact of COVID-19 on the economy was most pronounced in April, with evidence of recovery in May supported by improved agricultural output and exports, although the services sector remains subdued.
Further according to the committee the lowering of the Cash Reserve Ratio (CRR) in March released Ksh35.2 billion to the banking sector, and continues to be transmitted through the economy.
“To date, Ksh30.8 billion of the funds (87.6 percent) has been used to support lending, especially to the tourism, transport and communication, real estate, trade and manufacturing sectors,” said CBK Governor Dr Patrick Njoroge in the statement.
The ratio of gross Non-Performing Loans (NPLs) to gross loans stood at 13.0 percent in May, compared to 13.1 percent in April while repayments and recoveries in the trade, manufacturing, and real estate sectors were noted.
Private sector credit grew by 8.1 percent in the 12 months to May. The growth was observed mainly in Manufacturing (18.6 percent), Trade (8.2 percent), Finance and Insurance (7.2 percent), Building and Construction (5.7 percent), and Consumer Durables (16.7 percent).
According to the MPC, exports performed poorly in April but a significant rebound was observed in May and so far in June. Exports of goods improved by 4.1 percent in the period of January May 2020, mainly driven by tea, horticulture, and re-exports.
“In particular, the volume of tea exports increased by 23.5 percent. Horticulture exports are almost at normal levels, mainly due to a pickup in demand and easing of supply restrictions in key destination markets, and increased cargo capacity,” the statement read.
As a result, receipts from tea and horticulture exports increased by 15.2 percent and 22.7 percent, respectively, in May 2020 compared to May 2019.
Remittances recovered in May to USD258.2 million from USD208.2 million in April. Nevertheless, services exports were subdued due to the adverse impact of the pandemic on tourism and air transport services. The current account deficit is projected to remain stable at about 5.8 percent of the Gross Domestic Product (GDP) in 2020.
Further, the MPC said CBK foreign exchange reserves, which currently stand at USD9,210.6 million (5.53 months of import cover), continue to provide adequate cover and a buffer against short-term shocks in the foreign exchange market.