•Lenders recorded sound capital and liquidity ratios summing up to double-digit growths in profitability.
•There was surge in demand for credit by the various economic sectors in 2021.
Kenya’s banking sector remained stable and resilient in 2021, desite all sectors continued to shrink under the weight of the Covid-19 pandemic.
Lenders recorded sound capital and liquidity ratios leading to double-digit growths in profitability.
The PricewaterhouseCoopers (PwC) report released on behalf of the Kenya Bankers Association shows that the 38 commercial banks in the country recorded a 38 per cent increase in digitally disbursed loans in 2021, from Sh3.2 trillion in 2020 to Sh4.8 trillion.
The increase was attributed to the surge in demand for credit by the various economic sectors as well as uptake of technology for credit access.
Central Bank of Kenya data shows the largest proportion of the banking industry gross loans and advances were channeled to the personal and household, trade, manufacturing and real estate sectors in 2021.
In total, the four areas accounted for 73.79 per cent of gross loans in the 12 month period.
Trade, real estate, manufacturing and personal and household sectors accounted for the highest value of non-performing loans by registering 68.62 percent.
This, according to CBK was mainly due to delayed payments from public and private sectors, slow uptake of housing units and challenges brought about by the Covid-19 pandemic.
The onset of the pandemic in 2020, led to accelerated digitisation by the banking sector as most lenders moved to increase uptake of technology to meet customer needs.
According to the Innovation Survey 2021, the Kenyan banking sector has prioritised customer-centricity in innovation especially in the microfinance banking sector.
Further, collaboration and partnership were noted as key innovation drivers.
At the onset of the Covid-19 pandemic, the banking sector supported the economy by offering loan restructuring for customers unable to meet loan commitments due to the adverse impact of the pandemic.
According to the 2021 CBK Bank Supervision Annual Report, as at the end of December 2021, the outstanding restructured loans amounted to Sh423.6 billion representing 13 per cent total banking sector loans.
Out of this amount 92.3 per cent of the outstanding restructured loans were performing while 7.7 per cent were nonperforming.
This shows banks are among the most profitable outfits in Kenya, making them among the biggest generators of tax revenue based on their net earnings in a country.
However, latest CBK's Kenya credit survey shows loan defaults remains the biggest challenge for Kenya's banking sector as borrowers re-direct resources to basic commodities.
The survey shows there was a slight decrease in personal loan default rates in the first quarter of 2022 even as there was high rates in virtually all economic sectors except for agriculture and financial services which remained constant.