Firms say banks cut credit by 5.8% in October
Business chiefs reported that availability of credit fell 5.8 per cent in October, the first full-month that interest capping law was in force, a monthly survey showed yesterday.
“Although future expectations rose marginally, up 0.5 per cent to 59.7, the lower future expectations indicator suggests Kenyan firms anticipate that availability of credit will be lower in the future, as banks may be reluctant to lend to riskier credits given the introduction of the interest rate cap,” the Standard Chartered MNI Business Sentiment Indicator report stated.
Private sector activities fell 3.8 per cent last to 61.3, as both new orders and production dropped due to a decline in domestic demand.
The fall in the business sentiment was relatively broad-based with overall business conditions declining 6.6 per cent month-on-month.
However, most businesses are still expanding activity, with indicators of demand and production remaining above the breakeven 50 level. Firms reported hiring more employees.
“Firms remain generally optimistic about the near-term outlook. Thirteen of the future expectations indicators were equal to or higher than current conditions,” the report states.
Most notably, the export orders indicator increased significantly by 26.6 per cent month-on-month and moved back into expansionary territory.
Businesses reported robust external demand for agricultural goods in the lead-up to the holiday season. Input prices dropped significantly as businesses reported positive benefits from lower fuel and electricity prices, which, if sustained, could indicate lower inflation in the coming months as they start to pass these on to their customers, the report states.
Inflation was at 6.47 per cent in October, the Kenya National Bureau of Statistics data shows, up from 6.34 per cent in September – the highest level since February.
“The current conditions indicator increased to 60.0 from 47.4 as companies reported that external demand had increased significantly, with some businesses reporting particularly strong demand for agricultural goods from overseas in the lead-up to the holiday season.
Firms also expect foreign demand to remain strong in the coming months,” the report approved by StanChart head, thematic research Madhur Jha reads.
KNBS boss Zachary Mwangi/