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Kenya Private Lending Rises As Interest Rates Spread Narrows

Kenya Private Lending Rises As Interest Rates Spread Narrows

Kenya private lending grew 17.4 percent year-on-year to August 2013 as investors enjoyed cheaper credit facilities after banks reduced their loan rated and raised their interest on savings, reducing the interest rate spreads.

Latest data from the Treasury showed that commercial banks average lending and deposit rates have gradually declined to 16.96 percent and 6.36 percent respectively by August 2013, compared with 20.1 percent and 7.8 percent by August 2012.

The falling interest rates helped increase credit to the private sector by 17.4 percent in the period under review, compared to a 7.7 percent in at the same time in 2012.

The interest rate spread narrowed from 12.3 per cent in August 2012 to 10.6 per cent in August 2013 reflecting a larger decline in the lending rate, AllAfrica quotes The Star report.

Treasury’s budgetary and economic development details for the second quarter of this financial year also shows that short term money market rates that increased in August declined in September due to liquidity availability in the domestic money market.

“Liquidity tightness in the money market that was occasioned by slow Government expenditures in the early part of the FY 2013/14 eased in September 2013,” the Treasury report said.

The other indication that loans should be cheaper is the fact that the average rate that banks use to lend to each other decreased to 7.52 per cent in September from 8.9 per cent in August. In addition, the 91-day Treasury bill rate similarly eased from 10.5 per cent in August to 9.2 per cent in September.

The average lending rate for last month was 17 per cent while the Central Bank discount window through which banks borrow from the CBK as a lender of last resort has been pegged at 14.5 per cent from May this year.

The indicative Central Bank Rate has stayed at 8.5 per cent for most of this year and the next change is expected in January 2014.