A growth in lending created a 10 per cent rise in first half pretax profit at Kenya’s Equity Group Holdings plc, according to the latest financial statement.
The Group’s chief executive officer, James Mwangi said he was confident the government would remove a cap on lending rates, further boosting demand for credit.
The cap, introduced in 2016 to curb high interest rates on loans, prevents banks from charging more than four percentage points above the central bank’s benchmark lending rate, currently 9 per cent.
The move has resulted in borrowers perceived as too risky being locked out of the market, squeezing economic growth, Mwangi told investors on Thursday.
“We are very optimistic (it will be removed). The pains of this interest capping have been a big challenge,” Mwangi said.
“The interest cap has done its last breath.”
The finance ministry proposed removing the cap in June, saying it had starved small businesses of credit. However, some lawmakers have vowed to block the repeal.
Equity, which also operates in Uganda, Tanzania, South Sudan, Democratic Republic of Congo and Rwanda, made a first half pretax profit of KShs17 billion Kenyan shillings ($165 million), with interest income up 9 per cent to KShs27.7 billion.
Net loans to customers rose 17 per cent to KShs320.9 billion, topping the group’s target of 10 to 15 percent, Mwangi said.
He attributed the growth to new distribution channels, including mobile phone lending apps.
Equity’s banking business in Kenya, where it is the biggest lender by customers, provides the bulk of profits. Regional businesses contributed 18 percent to the first half total, unchanged from the same period last year.
The net interest margin dipped to 8.0 per cent from 8.2 percent the year before, while the bad debt ratio rose to 8.6 per cent from 8.4 percent, but held well below the Kenyan industry average of 12.7 per cent, Equity said.
Customer deposits jumped to Ksh458.6 billion from 393.69 billion the year before, while total assets rose to Kshs638.7 billion from KShs542.02 billion.
