Real estate leads in demand for credit
What you need to know:
- Personal and household loans took 25.2 percent (Shs.317.5b) while trade took 23.1 percent (Shs290.9b)
Building, construction and real estate recovered from more than a year of a slump to take the biggest share of approved credit in January, according to the Ministry of Finance Performance of the economy report.
The report, released last week, indicates that building, construction and real estate took at least 25.9 percent or Shs326.2b of approved credit.
This was followed by personal and household loans, which took 25.2 percent (Shs.317.5b) while trade took 23.1 percent (Shs290.9b). The three sectors, details indicate, accounted for more than half of credit extensions during the period.
Agriculture took 11.1 percent (Shs139.4b), while manufacturing and business, community, social and other services took 5.9 percent (Shs74.8b) and 7.2 percent (Shs90.68b), respectively. Transport took at least 1.2 percent or Shs15.6b.
However, the report indicates that the value of approved credit dropped to Shs1.25 trillion, which was lower than Shs1.586 trillion in December last year.
The report also noted that credit approval fell to 50.1 percent compared to 77.6 percent, largely on account of higher risk aversion, given that the share of non-performing loans increased to 5.35 percent from 5.21 percent.
During the period the stock of private sector credit declined slightly by 0.08 percent to Shs20.138 trillion from Shs20.15 trillion, of which Shs14.06 trillion was shilling-denominated credit while Shs6.07 trillion was foreign currency-denominated.
Lending rates for shilling-denominated loans declined to an average of 18.54 percent from 18.91percent due to high borrowing, largely due to substantial borrowing by large multinationals, which commercial banks consider less risky while foreign currency denominated loans reduced from an average of 8.01 percent to 7.73 percent.
The Ministry of Finance also indicated that the economy has continued to recover due to improvement in economic activity with all economic indicators pointing northwards.
For instance, during the period Composite Index of Economic Activity, which measures economic activity, grew by 1.3 percent on the back of reducing inflationary pressures.