Borrowers have been spared higher cost of loans after the Central Bank of Kenya (CBK) retained its benchmark lending rate at 9.0 percent for the sixth time in a row as lenders continue to withhold credit to the private sector.
The monetary policy committee says it held rates in an environment where inflation is contained– stable foreign exchange market.
In a statement, it said private sector credit had grown by 4.9 percent in the 12 months to April, compared to 4.3 percent in March, predicting further growth this year, despite banks’ complaints that a commercial lending cap was creating a credit squeeze.
The credit growth remained well below the central bank’s target rate of 12-15 percent, a growth adequate to support economic development.
“The committee noted that inflation expectations remained well anchored within the target range, but there is need to remain vigilant on possible spillovers of recent food and fuel price increases,” CBK Governor Patrick Njoroge said following Monday’s Monetary Policy Committee (MPC) meeting.
The regulator pointed out that limited private sector access is expected to be unlocked for the remainder of this year on the back of the launch of a lending service via mobile phone aimed at getting credit through to the country’s small and medium-sized businesses.
The SMEs will be offered unsecured loans of between Sh30,000 and Sh250,000, with a repayment period of between one and 12 months and attracting an interest rate of nine per cent.
Normal bank lending is capped at 13 per cent. Bankers say the cap limiting commercial lending rates to four percentage points above the benchmark has forced them to cut back on loans to high-risk groups.
CBK said the ratio of gross non-performing loans (NPLs) to gross loans jumped to 12.9 percent in April from 12.8 percent in February.