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Households borrow more as spending fears ease
Demand for loans to finance household consumption has gone up on the back of optimism about growth of the economy, signalling a fall in the concerns over Covid-19 that forced people to curtail discretionary spending in the past year.
Credit growth to the consumer durables segment, which includes goods such as home electronics, computers, jewellery, vehicles and furniture expanded by annualised rate of 16.5 percent in October, Central Bank of Kenya said.
This has also been attributed to increased economic activities after the lifting of the dusk-to-dawn curfew in October, with retail and wholesale traders reporting strong sales turnover and manufacturers increasing their production.
“Consumer durables show optimism and is also an important part of consumption which is a component of GDP…We expect they will take off in November and December with the reopening of the economy at the end of October,” CBK Governor Patrick Njoroge said during a briefing on Tuesday.
The lifting of the curfew that has been in effect since March 27 last year came after the country recorded reduced Covid-19 infection numbers and increased vaccination.
The CBK said commercial banks had shown the highest level of optimism about economic growth prospects since March, adding that they “have raised additional capital in preparation for lending next year”.
“The continued government infrastructure spending and the global economic recovery is expected to boost export demand. Respondents also expect consumer demand to pick up during the festive and back-to-school seasons,” the CBK added.
Credit to the private sector expanded by 7.8 percent in October 2021, from seven percent in August with the highest growth recorded in sectors like manufacturing (10.9 percent) transport and communication (9.6 percent) and business services (8.2 percent).
The number of loan applications also remained strong in October, reflecting improved demand with increased economic activities.
Hotels have also reported continued recovery with the highest levels of bed occupancy and bookings since the onset of the pandemic, and increased restaurant and conferences services, although there are concerns over the new Omicron variant of Covid that is threatening to disrupt global travel afresh.
