News Column

Kenya : COMMERCIAL banks of KENYA in bad debts

June 9, 2014

The banking industry succumbed to more than Sh81 billion of non-performing loans.

The personal and household sector constituted 26% of the total non-performing loans (NPLs) followed closely by the trade sector at 24.7%. The real estate and transport and communication sectors comprised of 13.4% and 7.9% of the NPLs. The lowest level of bad debts was recorded in the mining and quarrying sector whose contribution to the NPLs stood at 0.6%.

The proportion of NPLs in the agriculture and manufacturing sectors stood at 6.8% each. The ratio of NPLs to gross loans increased from 4.7% in December 2012, to 5.2%.

Substantial share of the banking sector loans and advances were extended to personal, trade, real estate and manufacturing sectors, which accounted for 73% of gross loans in 2013. Over the same period, 79% of the sector s loan accounts were in personal/household sector, which accounted for more than 25% of the banking sector credit, and 26% of the NPLs.

Trade, real estate and manufacturing sectors accounted for 47.1% of the sector s credit and 44.9% of NPLs the banking sector credit was extended to personal/ household sector.

The increase in non-performing loans signalled an increase in credit risk in second half of 2012.

The banking sector is expected to maintain its growth momentum supported by the roll out of full file credit information sharing regional integration initiatives and advances in information and communications technology. Commercial banks average lending rate declined from 18.13% last year to 16.99%, and the average interest rate paid by banks on deposits increased to 6.65% from 6.51% over the same period. The interest rate spread from 11.62% to 10.34% in the same year, reflecting a decline in the lending rate.

The banking sector registered higher performance, with total net assets of 16% from Sh2.33 trillion in December 2012 to Sh2.7 trillion in December 2013.

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Source: TendersInfo (India)

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