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Experts suggest Kenyan banks loans level as healthy

NAIROBI (Xinhua) -- The level of loans given by Kenyan banks has been assessed to be healthy in a new briefing by the Nairobi-based regional investment house Standard Investment Bank.

Economic growth in Kenya has slowed in the last four months because of the general elections and a repeat of the presidential election last month, causing some borrowers especially the small scale entrepreneurs to defer servicing loans, banks said .

“The level of non-performing loans is yet to mushroom to become a systemic problem,” said Francis Mwangi and Martin Kirimi, researchers at the investments bank, in a joint briefing on Thursday.

In August, the level on non-performing loans, or loans that had not been serviced for several months rose to 10.7 percent of the total loans given by banks, which the Standard Investment Bank termed as a “10 year high”.

But it noted that the majority of the banks had not noted any increase and that only a few banks were responsible for the amount of loans that are not being repaid.

The two financial researchers also said Kenyan banks have adequate capital meaning that even if they were to write off or cancel all those loans, it will not affect their financial stability.

“Non-performing loans are mainly being driven by business loans and not personal or household credit. Within the business segment, building and construction, trade and agriculture sectors have the highest amount of these non-performing loans,” the researchers said.

Businesses across all sectors have reported slow business, usually associated with the electioneering period, various business leaders reported. This is being seen as one of the causes of companies not being able to repay their loans on time.

Kenya Private Sector Alliance reported its members had lost 7 million U.S. dollars related to slowdown during the election period.

“This loss is only in the four months that the electioneering period was open,” said the alliance’s Vice Chairperson Patrick Obath. Similar views were expressed by the Chairman of the Kenya Chamber of Commerce and Industry Kiprono Kittony.

“There is definitely low circulation of money which has affected consumer purchasing power and overall business performance,” he said.

Kenya Finance Minister Henry Rotich said although drought and elections cut growth by a massive one percent, the economy is expected to register growth next year at 6 percent.

The ongoing rains are expected to provide adequate food supplies into next year, meaning a rebound of the agriculture sector and cutting on the cost of food.



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