Kenya is ranks third in Sub Saharan Africa for access to credit, a survey by the Institute of Chartered Accountants in England and Wales shows.
Kenya trails Rwanda and Zambia for ease of credit financing, the study released yesterday shows, where Sub-Saharan Africa performs relatively poorly in terms of getting credit compared to other regions of the world, with a regional average DTF (distance to frontier) score of 35.9.
Distance to frontier measure complements the annual ease of doing business ranking, which compares economies with one another at a point in time.
ICAEW Middle East, Africa and South Asia director Michael Armstrong however said Kenya stands to gain from the recent capping of interest rates at four per cent above the Central Bank benchmark rate, currently at 10 per cent.
“The interest cap enacted in Kenya benefits customers by both keeping the rates regulated, as well as spurring greater competition amongst banks. It could also further incentivise more accurate credit scoring. All of these measures should help Kenyan businesses in the longer term,” Armstrong said.
The report, commissioned by ICAEW and produced by partner and forecaster Oxford Economics, provides a snapshot of the region’s economic performance focusing specifically on Kenya, Tanzania, Ethiopia, Nigeria, Ghana, Ivory Coast, South Africa and Angola.
“Access to finance is a vital driver of economic growth, so this is great news for Kenya,” Armstrong said.
According to the report, and drawing on insights from World Bank’s Doing Business
Rankings, Rwanda performed the best followed by Zambia the Kenya.
Others are Ghana, Mauritius, Uganda, Namibia, Nigeria, South Africa, Botswana, Zimbabwe, Ivory Coast, Tanzania, Ethiopia and Angola respectively.
The report notes that Kenya’scapping of interests rates is likely to spur growth.
“This could distort credit markets, but on a more positive note could spur greater competition and incentivise more accurate credit scoring. Both would be positive for access to finance in the longer term,” the report states.
It however notes that Kenyan authorities are expected to adopt a cautious approach towards monetary easing, given that banks will require some time to adjust to the new regulation, and considering uncertainty related to global financial conditions,
The outlook for economic growth in East Africa remains generally positive, largely because the region’s economies are more diversified than those of the oil or commodity-dependent countries in other regions, the report states.
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