The latest annual banking supervision report by the Central Bank of Kenya (CBK) shows that the country’s banking industry gross non-performing loans increased by 28.6pc to hit Ksh 647.4 billion at the end of last year.
This is against a loan book of Ksh 4 trillion that banks advanced to various sectors.
The ratio of non-performing loans to gross loans increased to a high of 15.3pc from 13.8pc in 2022 attributed to the high cost of borrowing as a result of the central bank increasing its CBR rate and the weak business environment.
This prompted banks in 2023 to set aside Ksh 527 billion to cover the non-performing loans.
Churchill Ogutu an economist at IC group is calling for adjustment of monetary policy stance in next review, proposing a reduction of the benchmark lending rate by 300 basis to reflect the current inflationary environment as well as reduce the cost of credit.
The benchmark lending rate was pushed at an eleven-year high of 13pc in February this year and has remained at that rate, making the cost of loans expensive.
The annual supervisory report indicates that in 2023, banks posted an 8.8pc decline in combined pretax profit that dipped from Ksh 240.4 billion in 2022, to Ksh 219.2 billion in 2023, which was attributed to an increase in total expenses.
Gerald Nyaoma Director, Bank Supervision Department at the apex bank noted that deepening the greening of the banking sector is top of the agenda in 2024.
In addition, the central bank is keen on strengthening banking sector liquidity by issuance of Internal Liquidity Assessment Process Guidance Note, strengthening of the Anti-Money Laundering framework as well as move towards near-real-time supervision, through the collection of supervisory data on an almost real-time basis.
