Commercial banks have now restructured loans amounting to Sh1.63 trillion, which is more than half of all loans in the country due to the Covid-19 pandemic.
This is after borrowers, hard hit by the health crisis, took advantage of the relief announced by the Central Bank of Kenya (CBK).
The CBK said on Wednesday that the Sh1.63 trillion restructured is equivalent to 54.2 percent of the total banking sector loan book of Sh3 trillion by the end of December.
The sector regulator said that out of this, personal and household loans amounting to Sh333 billion (39.6 percent of the gross loans to this sector) have had their repayment period extended.
For other sectors, a total of Sh 1.29 trillion had been restructured mainly to trade (21.3 percent), manufacturing (20.4 percent), real estate (15.4 percent) and agriculture (12.4 percent).
"These measures have continued to provide the intended relief to borrowers," CBK Governor Dr Patrick Njoroge said in a statement that announced the latest Monetary Policy Committee (MPC) decision.
The CBK said of the Sh35.2 billion that was released by the lowering of the Cash Reserve Ratio (CRR) in March, Sh32.6 billion (92.7 percent) has been used to support lending, especially to the tourism, trade and transport and communication, real estate, manufacturing and agriculture sectors.
Growth in private sector credit stood at 8.4 percent in the 12 months to December 2020, as demand recovered with the improved economic activity.
Strong credit growth was observed in manufacturing (12 percent), transport and communications (13.6 percent), agriculture (15.3 percent), real estate (8.7 percent) and consumer durables (18.1 percent).
Dr Njoroge said the operationalisation of the Credit Guarantee Scheme for the vulnerable Micro Small and Medium sized Enterprises (MSMEs), will de-risk lending by commercial banks, and is critical to increasing credit to this sector.
The MPC, which sets the rates banks use as a basis to price their loans, noted that the package of policy measures implemented since March 2020 were having the intended effect on the economy, and are being augmented by implementation of the announced fiscal measures in the FY2020/21 Budget. This saw the team retain the Central Bank Rate at 7 percent, which means that banks will retain the rates they are charging borrowers at the current levels.
"The MPC concluded that the current accommodative monetary policy stance remains appropriate, and therefore decided to retain the Central Bank Rate (CBR) at 7 percent," the CBK said in the statement.
In the January 27 meeting, Dr Njoroge said the MPC assessed the outcomes of its policy measures deployed since March 2020 to mitigate the adverse economic effects and financial disruptions from the pandemic.
Njoroge said the MPC conducted its Private Sector Market Perceptions Survey this month that revealed expectations of strong economic activity over the next two months, and greater optimism on the economic prospects in 2021.
"Respondents attributed the improvement largely to the reopening of all learning institutions, expectations of acquiring a Covid-19 vaccine, the implementation of the Economic Stimulus Programme by the Government, resumption of most businesses that had stalled due to the pandemic, and strong agricultural production," the statement said.
It added that uncertainties were however noted with regard to the increase in Covid-19 infections globally and emergence of new variants.
The Survey of hotels and flower farms by the CBK conducted between January 13 and 15, showed continued recovery from the disruptions in April and May.
In particular, 97 percent of the respondent hotels are now open, compared to 96 percent in November 2020 and 35 percent in April, with continued re-engagement of employees particularly during the festive season in December.
Average bed occupancy was reported at 26 percent in December 2020, compared to 11 percent in April. All respondent flower farms indicated that they are now operational, while employment and export orders for flowers have improved and are now close to pre-Covid-19 levels.
"Respondents also indicated that orders for flower exports over the next four months are expected to remain strong, but with a risk of potential disruptions from a tightening of Covid-19 containment measures in key markets," Dr Njoroge said.