CBK sees persistent credit risks

CBK sees persistent credit risks

  • According to the CBK Governor, it will take a complete right turn from the effects of the COVID-19 pandemic for the credit risks to normalise.
  • Credit risks have tapered in recent months with the ratio of non-performing loans (NPLs) to gross loans falling to 13.1 per cent in December 2021 from 13.6 per cent in October.
  • Gross NPLs stood at Ksh.444.2 billion in February last year- the highest level since the onset of the COVID-19 pandemic in March 2020.


The Central Bank of Kenya (CBK) expects credit risks to hold even as the banking sector’s asset quality marks an improvement in recent months.

According to the CBK Governor, it will take a complete right turn from the effects of the COVID-19 pandemic for the credit risks to normalise.

“Credit risks are high and will remain high for some time until the economy overcomes the pressures from the COVID-19 pandemic including the bulk of economic actors who include borrowers,” CBK Governor Dr. Patrick Njoroge said on Thursday.

Credit risks have tapered in recent months with the ratio of non-performing loans (NPLs) to gross loans falling to 13.1 per cent in December 2021 from 13.6 per cent in October.

The easing credit risks have been largely supported by repayments and recoveries in the sectors of manufacturing, personal & household loans, transport & communication and construction.

Gross NPLs stood at Ksh.444.2 billion in February last year -- the highest level since the onset of the COVID-19 pandemic in March 2020.

While the CBK sees unchanged credit risks, the reserve banks expect gradual ease to the NPL ratio supported on one hand by the growth of new credit lines.

“We expect NPLs to gradually decline as the economy strengthens, driven largely by repayments and write-offs,” added Dr. Njoroge.

Private sector credit growth has meanwhile recovered to 8.6 per cent as of the end of December from 7.8 per cent in October pointing to more loans to the private economy in the last quarter of 2021.

The private sector credit growth rate is now set to climb into the double-digit range for the first time since June of 2016.

Nevertheless, the CBK expects this outcome to be gradual with credit standards remaining unchanged.

“We are not predicting a significant surge in lending as credit standards should remain the same. We don’t want a weakening in credit standards going forward,” said Dr. Njoroge.

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