Business Daily Africa reports that the cost of credit in Kenya is “likely to remain high” despite measures taken by the Central Bank of Kenya’s (CBK) to spur commercial banks to lend.  Such monetary policies included lowering the amount of cash that banks are required to hold in its coffers (from 6% to 5%), as well as the launch of credit bureaus.  Nevertheless, the CBK issued a report indicating that commercial banks had raised the rates at which they lent to borrowers by an average of 1.7% last year, to an average of 17%.  “Banks will be a lot more cautious and prudent this year,” said James Macharia, NIC Bank’s managing director, who underscored the fact that the risk of unemployment impacting consumer business of various commercial banks, and the potential increase in defaults on loans already issued, forces banks to take a more prudent stance towards lending.

 

Speaking of NIC, last week the bank reported a 41% jump in annual pretax profit to 1.484 billion shillings ($18.66 million).  The bank increased its branches to 12 in 2008 and is the process of acquiring a 51% stake in Tanzania’s Savings and Finance Commercial Bank.  Macharia attributes the bank’s success in the current economic climate to its diversification of services.  “We are somewhat insulated from the rest of the world in light of the weak transmission mechanism between our financial system and that of developed countries,” he noted.  Moreover, the bank’s loan book recorded a 35% growth to 30 billion shillings mainly driven by the Bank’s expanding market share. Deposits closed the year at 35 billion shillings, reflecting a 42% increase over 2007.

 

 

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