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Stanbic Bank
Stanbic Bank
Stanbic Bank
Stanbic Bank

Commercial lending rates slightly rise in July-report

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Commercial banks’ Shilling denominated monthly lending rates slightly edged upwards to 19.2 per cent in July from an average of 17.7 per cent in June 2018, according to the Performance of the month of August Economy Report published by the Ministry of Finance Planning and Economic Development.

Foreign currency denominated lending rates however, declined from a weighted average of 8.4 per cent to 7.6 per cent over the same period.
During the month of August 2018, the Central Bank maintained its policy rate at 9.0 per cent, which has been the status quo since February 2018.

The Central Bank Rate (CBR) has been kept at single digit since October 2017, with the expectation that inflation will remain with in the 5 per cent target both in the medium and long run.
The total value of loans approved in July increased by 8.2 per cent to Shs1, 383.3 million from Shs1, 278.3 million in June 2018.

However, the stock of outstanding private sector credit amounted to UShs13, 379.1 billion in July 2018 down from Shs13, 404.7 billion in June 2018, registering a decline of 0.2 per cent. “This could be explained by higher payback during the month that offset the extensions,” the report says.

According to the report, the pick-up in credit is majorly attributed to the supportive monetary policy stance, as well as eased credit standards resulting from lower risk of default which is reflected by a reduction in the ratio of non-performing loans to total gross loans. This reduces from 5.3 in March 2018 to 4.4 in June 2018.

By Sector, manufacturing received the largest share of credit extended in July 2018, at 28.8 per cent. Other notable recipients of credit were; Trade (18.1 per cent), Transport and Communication (17.7 per cent) and Building, Construction and Real Estate (10.9 per cent).

Government Securities
According to the report, during the month of August 2018, there were three Treasury bill auctions and one bond auction in the primary market. And Shs650.46 billion was raised, of which Shs453.23 billion was from treasury Bills and Shs197.23 billion was from T-bonds.

“Shs571.17 billion was used for the Refinancing of maturing debt whilst Shs79.29 billion went towards financing other activities in the government budget,” says the report.

However, according to the report, treasury bill rates for the month of August 2018 were largely stable following the rejection of some bids in July 2018. The average rates for August 2018 were 10.6 per cent, 12 per cent, 14.1 per cent for the 91, 182 and 364 day tenors respectively compared to 10.5 per cent, 12 per cent, and 14.5 per cent in July 2018. All auctions were oversubscribed with an average bid to cover ratio 6 of 2.5 an improvement from 1.2 recorded the previous month.

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