Three sectors – commerce, real estate and manufacturing – account for more than half (54%) of the 514 billion shillings of bad loans held by Kenyan banks.
Data released by the Central Bank of Kenya (CBK) on the stock of bad loans by sector for 11 major sectors of the economy reveals that bad loans in trade have risen 10% since January to a record 109 .8 billion shillings at the end of the first half. of the year.
The stock of bad debts in the manufacturing sector rose fastest at 57% to 89.4 billion shillings in the six months to overtake real estate, which had 79.4 billion shillings in default.
Other sectors which recorded a notable increase during the period under review were building and construction, which increased by 42% to reach 41.5 billion shillings, and agriculture, which increased by 7 billion shillings. to reach 26.3 billion shillings.
The rise in bad debts was blamed on tough economic times ahead of the August election and external factors that led to supply chain issues.
“The increase in defaults was systemic and was attributable to a few large borrowers facing specific challenges in the respective businesses,” the CBK said in a statement.
The CBK, however, does not seem to be troubled by the increase in bad debts, which now represent 14.7% of the banks’ total loan portfolio.
“Banks continued to make adequate provisions for non-performing loans,” the CBK said in the statement.
The increase in bad debts comes at a time when credit growth to the country’s private sector and interest rates are rising. Credit growth in June was recorded at 12.3%, the highest since April 2016.
The average interest rate charged on bank loans in July was recorded at 12.35%, the highest since November 2019, when rates were 12.38%.
Lending rates have gradually increased as banks gain CBK approval for risk-based pricing, which allows lenders to charge interest based on the risk rating of the borrower.
Only two sectors have recorded a decline in the stock of bad debts since the beginning of the year. Financial services saw defaults drop 4.0% to 5.3 billion shillings, and the stock of bad debts in the mining sector also fell 12% to 2.2 billion shillings.