The banking industry has recorded tremendous growth in the last 15 years. A report by Kenya Bankers Association revealed that as at the end of 2018, the amount of outstanding loans and advances issued by Kenyan lenders stood at KSh2.5 trillion, equivalent to 52 per cent of Kenya’s real GDP. The amount has grown tenfold from KSh264 billion in 2003.

The report highlighted the alarming trend of persistent growth in non-performing loans in the last five years. At the end of 2018, the NPL made up 12 per cent of the gross loans, up from 5 per cent in 2013.

“There is an obvious focus on the level of NPLs in the market. While that level is not in its historically high levels, its persistence over the past five years is feeding into the banking industry’s risk-taking behavior,” read the report.

The rise in bad loans is attributed to delayed payments by government institutions and the private sector. Kenyan Banks are putting in measures to improve the recovery of loans and advances. The Director of KBA’s Center for Research on Financial Markets and Policy, Mr. Jared Osoro said that steps should be taken to ease the challenges faced by households and small businesses to enable them to repay their loans.

The level of growth in Customer deposits has been on an upward trend in the last three years largely due to deposit mobilization through the digital banking platforms and agency banking. The study by KBA’s Center for Research on Financial Markets and Policy showed that tier 3 banks recorded the sharpest growth in deposits in the past three years. In 2018, the small banks booked 33 per cent growth in customer deposits, indicating growing confidence in the market segment. Tier one banks recorded a slight decline in the growth rate of deposits while tier two lenders booked a weak growth in clients deposits the last year.