On the slowdown in private sector credit growth, which was largely due to factors in trade, manufacturing, real estate, and private households, the credit to private households, manufacturing, and real estate had picked up in March and April with the number of loan approvals increased by 35.7 percent while their value dropped 16.3 percent significant to the Change and Rise in private households, manufacturing, and real estate Loans
A key factor is how banks adjust their business models in the new environment. This is a shift from lazy banking to real banking where Kenyan banks used to give out a lot of unsecured loans, some by being creative in terms of collateral or timings of repayments, the banks have been forced to tighten up their loan criteria. It doesn’t make sense any more for them to offer riskier loans
well, the banks have to change to New business models in helping them remain sustainably profitable in reacting not just to the interest rate cap but more generally to the things that are happening in the Kenyan economy.
Lenders who have been relying largely on the interest income from customer loans posted a significant decline in net profit during the first quarter of 2020. Most of them attributed the reduced earnings to the effects of the interest rate cap. Banks warned that a further dip in private sector loan growth was likely to be witnessed into the second quarter of the year (April-June) as banks continue investing in government securities and assets with higher returns.
Banks reported post-tax declines in January-March: StanChart reported the largest drop of 20.54 percent followed by Barclays at 19.72 percent, KCB at 8.35 percent, Co-op at 5.83 percent and Equity down 5.64 percent hence the warning for the Banks to be more resilient by CBK Governor Patrick Njoroge.