Banks in Kenya are projecting an uptick in credit uptake riding on increased economic activity after the partial lockdown in March and the confidence associated with efforts to manage the pandemic.
In the Market Perceptions Survey carried out by the Central Bank of Kenya early May, 20 per cent of bank respondents said expected payments from the government as the financial year ends is set to increase optimism in the economy and thereby request for loans.
Equally, 20 per cent of bank respondents said the opening of schools is also set to positively influence credit demand in the country.
About 65 per cent of bankers said increased economic activities across the country following March partial lockdown is also driving demand for loans.
An estimated 40 per cent of lenders, however, cited COVID-19 related uncertainties and the sluggish payment of suppliers and contractors by both national and county governments as risks to their expectations on credit demand.
The survey, which preceded the CBK’s Monetary Policy Committee meeting, also inquired from non-bank respondents the extent of their need for credit in the next one-year period.
Players in the hospitality industry, which is still smarting from devastation of the global pandemic, indicated the need to restart their businesses, refurbish, upgrade and pay salaries due to low business over the last year as drivers for credit demand.
Other sectors of the economy said increased production costs, delayed payments from customers, working capital requirements and slow business growth as reasons for the need for bank financing.
The agricultural sector, however, was the only segment of the economy which according to the study reported 41 per cent of the respondents expecting low or very low demand for credit.
Asked how the country’s business environment could be improved, bank respondents called for the payment of pending bills by both national and county governments to unlock liquidity, and the need for more economic stimulus and tax incentives to support businesses post-COVID-19.
They also called for a quick roll out of COVID-19 vaccination check the spread of the disease.
Since the first COVID-19 case was announced in Kenya in March last year, 171,084 positive cases have been recorded from 1,815,766 cumulative tests. At the moment, over 970,000 people in Kenya have been vaccinated from Covid-19 and the roll out of the second AstraZeneca vaccine is underway for those who received the first shot in March.
Further, they recommended public-private partnerships to enable the creation of investment opportunities across all economic sectors, setting up of a centralized collateral registry to improve efficiency and the need to reduce over regulation, which increases the cost of doing business through compliance costs.
Non-bank private firms on the other hand called out over taxation while recommending affordable credit, provision of incentives to the tourism industry, tax relief for businesses hurting from the pandemic, lifting of COVID curbs and provision of SME stimulus package to catalyze economic recovery.