Kenya banks keep off government securities to lend SMEs

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Subscription to Kenya’s government securities in Kenya has hit a six-month low as banks keep off the debt market to resume lending to small businesses following repeal of a law capping interest rates.

The government papers have been overwhelmingly undersubscribed for the last three weeks, with subscription standing at an average of 50 percent, down from 290 percent in January.

Last week, the subscription rate stood at 53.5 percent, down from 55.3 percent the previous week, according to the National Treasury.

Analysts have noted that with the rate cap in place, banks preferred to lend to less risky borrowers like the government through the purchase of government securities, which saw high subscription rates on government securities.

“However, with the rate cap repeal, banks have started to increase their credit accessibility and admit riskier borrowers including small and medium-sized enterprises and individuals, which has seen a reduction in subscription rates for government securities,” Cytonn, a Nairobi-based investment firm, noted Tuesday.

The firm noted the under subscription will heighten as banks are lending more to the private sector. Enditem

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