NAIROBI, Sept. 19 (Xinhua) -- The Central Bank of Kenya (CBK) has urged commercial banks to embrace risk-based lending to expand credit to the private sector.
CBK Governor Patrick Njoroge told a media briefing in Nairobi that growth of credit to the private sector in 2017 is below levels recorded in the past two years.
"We are pushing for banks to improve their lending practices in order to spur growth of credit to the private sector," Njoroge said. "One way to expand credit to the private sector is if banks price interest of loans according to the level of risk."
Since the introduction of interest caps of 4 percent by commercial banks above the Central Bank rate, there has been a decline in access to credit.
The governor said the private sector plays a key role in the economic development of the country.
"We therefore want the private sector to have access to affordable credit in order to fund their operations," he said.
Njoroge said that banks should utilize consumer credit history in order to determine borrowers' credit risk.
"Those with a history of repaying their loans on time should access loans at lower interest rate as compared to those with a negative history," he said.
The central bank has also launched an awareness campaign to increase transparency in the lending sector.
"We want consumers to have more information on the lending rates of banks so that they can make better borrowing decisions," Njoroge said, urging banks to change their business models and become more customer centric.
