Loan underwriting remains stable in the face of rising prices

Loan underwriting remained stable in March, defying the volatility in commodity prices seen since November last year.

According to the Ministry of Finance’s report on the state of the economy, in March, credit to the private sector increased by 23.7%, representing a value of 1,082 billion shillings.

During the period, according to the report, loan approvals peaked at 59%, becoming the highest approval rate since January. The approval rating shows a continued recovery in the economy although it remains held back by rising commodity prices.

Personal and household loans, just like in February, made up the largest share of approved loans, occupying 26% while trade increased by 23.9%.

Building, mortgages, construction and real estate gained 14.2% while business, community, social and other services and agriculture gained 10.2% and 9.2% respectively.

In terms of value, Shs281b went to personal and household loans, while Shs255b went to trade.

Building, mortgage, construction and real estate Business, community, social and other services received Shs 111 billion while Shs 100 billion went to agriculture.

Mining and quarrying received Shs 90 billion, manufacturing (Shs 65 billion) while transport, communications, power and water received Shs 23.7 billion.

The report also said lending rates are rising to 19.35% from 18.84% in February for shilling-denominated loans due to rising inflationary pressures and the outlook which are key considerations for commercial banks when determining loan rates.

Inflation increased in April, reaching 4.9%.

However, interest rates on foreign currency-denominated loans were reduced to a weighted average of 5.97% in March, from 6.25% recorded in February.

Edward N. Arrington