Loans to homes rose by the highest margin, outpacing other segments of the economy in the three months ended September, an analysis of industry statistics shows, signalling a changing attitude of lenders towards unsecured lending.
Gross household loans increased by Sh25.48 billion, or 4.01 percent, to Sh660.69 billion compared to a quarter earlier, latest data by the Central Bank of Kenya (CBK) indicates, outpacing trade loans.
Risk-averse lenders such as Equity and Co-op Bank have suspended unsecured personal lending due to a perceived higher risk of default than what is provided under the September 2016 legal ceilings on loan charges.
This was further exacerbated by requirement for higher impairment costs for risky borrowers as a result of stringent global accounting rules enforced on January 1.
Gross personal loans have, however, expanded from Sh615 billion in December 2017 to Sh623.2 billion in March, Sh635.21 billion in June and Sh660.69 billion in September.
Banks slowed lending to traders in the period, with loans rising 0.63 percent to Sh479.41 billion which is slower than 3.32 percent recorded in the previous quarter ended June.
Loans to homes, some of which go into supporting family businesses, accounted for 26.02 percent of the nearly Sh2.54 trillion gross loans by the banking industry as at end of September.
That was a slower 1.84 percent growth over Sh2.49 trillion in June, which was 2.49 percent rise from Sh2.43 trillion in March.
“The increase in gross loans and advances was largely recorded in the Trade, Personal/Household, Real Estate and Manufacturing sectors,” the CBK says in reference to performance in three months through June 2018.
“The increase in gross was mainly due to increased loans granted to individual borrowers and credit granted for working capital purposes.”
Manufacturing sector posted the second highest growth in loans in June-September period at 3.35 per cent to Sh331.14 billion, followed by transport and communications whose stock rose 2.94 per cent to Sh173.46 billion.
Lending to real estate sector, which posted the largest growth in defaults in the quarter to June (15.8 percent), was flat, rising a marginal 0.03 per cent to Sh392.81 billion.
Loans to firms in financial services as energy and water sectors, however, dropped 2.17 percent and 1.89 percent, respectively to Sh90.92 billion and Sh119.15 billion.
“Loans and advances, which increased by 2.5 percent, remained the main component of assets, accounting for 58.5 percent in the second quarter of 2018,” the CBK said.
“This was a slight increase from 54.8 percent recorded in the first quarter of 2018.”