CThe interest rate cap law, introduced in September 2016, has stifled credit growth to the private sector and subsequently hurt Kenya’s economy. Most Kenyans agree that the cap should be removed. However, judging by parliamentarians’ sentiments, there is no indication of repealing the law.
The rate of credit growth to private enterprises dropped to 2.5 per cent from a high of 15 per cent. Signs of credit growth to individuals and private businesses emerged when banks and Fintechs devised creative ways to continue lending. Introduction of digital credit facilities such as; M-Shwari, KCB-Mpesa, Tala, Branch, and most recently Fuliza overdraft facility by Safaricom.
Additionally, non-technological financial organizations have also positively contributed towards Kenya’s credit sector. A report by Citi research lists ASA international as one of the non-tech providers of credit to small businesses in the country.
Kenya Shilling Overvalued?
According to Citi, the Kenyan shilling is overvalued and its 2019 end year forecast is 108.9 against the US dollar.
Citi researchers are confident that Kenya’s economy will continue to grow rapidly despite the many challenges it’s facing. In the report, the analysts note, “Our overall takeaway on Kenya is that despite a few uncertainties and challenges – rising public debt and the need for fiscal consolidation, the rate cap and a currency that is arguably somewhat overvalued – the backdrop looks robust and supportive of growth.”
The report also notes that Kenya’s equity market is one of the best performing frontier markets.
READ; Kenya is world’s best performing Frontier market in 2019
