NAIROBI, Kenya- Kenya’s private sector is seeing a shift in borrowing trends, with Saccos stepping up as a growing source of credit.
As borrowers sought alternative financing options, the share of private sector credit provided by Saccos increased to 11pc in August, up from 9.3pc previously.
This surge helped Saccos capture 15.5pc of the market, a notable increase from July’s 15.1pc. Meanwhile, commercial banks saw their share drop slightly, from 84pc to 83.6pc, as microfinance institutions held steady at 0.9pc.
The increased demand for Sacco loans comes as credit from commercial banks to the private sector slowed, shrinking to 1.3pc in August from 3.7pc in July.
According to Central Bank of Kenya (CBK) Governor Dr. Kamau Thugge, this decline is tied to both the appreciation of the Kenyan shilling and the delayed effects of monetary policy tightening.
In his post-Monetary Policy Committee (MPC) briefing, Dr. Thugge highlighted the impact of exchange rate adjustments on foreign currency-denominated loans.
“If we adjust for the exchange rate effect, credit to the private sector would have grown by 4.3pc instead of the recorded 1.3pc. However, even with this adjustment, the pace of growth is slower,” he noted.
Local currency-denominated loans continued to show growth, increasing by 5.2pc in August, while foreign currency loans—making up 26pc of total loans—contracted by a significant 10.6pc.
This trend reflects the challenges posed by currency fluctuations and tighter monetary conditions.
Despite the slowdown in credit, the CBK maintains that Kenya’s banking sector remains stable, with healthy liquidity and strong capital adequacy ratios.
However, the challenge of rising non-performing loans (NPLs) persists. The ratio of gross NPLs to total loans increased to 16.7pc in August, up from 16.3pc in June.
In a bid to stimulate economic growth and counter the effects of slower private sector credit, the MPC decided to cut the benchmark lending rate by 75 basis points, bringing it down from 12.75pc to 12pc.
The CBK aims to ease monetary conditions and boost credit growth by making borrowing more affordable.
