Rating firm says Kenya’s banking industry at high risk
S&P Global Ratings has positioned Kenya’s banking industry at high risk due to its shrinking banking performance well as dropping wealth levels.
“We consider that the banking sector in Kenya has entered a contraction phase,” states S&P Global Rating report.
The global rating firm has put cap on interest rates by the Central Bank as the main reason for this trend. The domestic credit growth slowed in 2016 to 3 percent in 2017 and 5 percent in 2018 as the regulator put measures on lending rates.
“In addition, we view credit risk in the economy as a key weakness because of the very weak payment culture and rule of law, weak underwriting standards, high degree of credit concentrations, and high level of foreign currency lending,” the report stated.
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The rating firm said Kenya’s banking sector was being hindered by infrastructure gaps and truncated wealth changes due to low per capita on Gross Domestic Product.
Even with the removal of minimum rate cap on deposits, the global rating firm expects the current trend to progress as parliament holds the lending rates with the interest rate cap.
S&P however, has criticized the regulators’ failure to provide satisfactory regulatory oversight and monitoring.
Kenya was ranked at category 9 along Tunisia, Turkey, Uzbekistan, Cambodia, Vietnam besides Nigeria which was ranked at position 10 in its Banking Industry Country Risk Assessment, which signifies higher risk.