Lending to Kenya's Nairobi economy likely to suffer

Lending to Kenya's Nairobi economy likely to suffer

Non-performing loans are expected to continue to suffer from a tax-induced economic slowdown as recent tax measures take a toll.

A significant number of analysts say that the implementation of new tax measures will likely depress consumer incomes, triggering discretionary spending while impacting their ability to meet expenses such as the servicing of loans.

The decrease in consumer spending sets up businesses, particularly small and medium-sized enterprises, for lower sales volumes, impacting their ability to meet loan repayments.

The lack of economic activity is all in the absence of economic activity. I have been here for a week and I can tell you Nairobi is not buzzing,' said Kato Mukuru, head of frontier research at EFG Hermes.

At the end of June, the ratio of gross non-performing loans remained elevated at 14.5 percent, down from 14.9 percent at the end of June.

According to data from the Central Bank of Kenya, loan recoveries have been reported in transport and communication, agriculture, manufacturing, personal and household sectors.

In July, the average commercial bank lending rate surged to a 65-month record high of 13.5 percent.