(Updates with interest rate spread in third paragraph.)
June 20 (Bloomberg) -- Kenyan President Mwai Kibaki said there is an “urgent need” for commercial lenders in the East African country to cut their lending rates to enable more Kenyans to borrow and spur economic growth.
“Ensuring access to finance at affordable rates is not a one-way street,” Kibaki said in an e-mailed statement from his office in Nairobi, the capital, today. “Banks also stand to reap a lot of benefits from an expanded and growing economy as a result of ensuring access to affordable finance.”
The average interest rate spread -- the difference between commercial bank lending rates and deposit rates -- remains too wide, even as the risk of loan default has declined, Kibaki said. The interest spread narrowed to 10.5 percent in April, from 10.6 percent in January, Central Bank Governor Njuguna Ndung’u said on June 6.
Gross non-performing loans fell 5.4 percent to 59.8 billion shillings ($659 million) in March, from 63 billion shillings a year earlier, Kibaki said. Commercial Bank of Africa Ltd. increased its base lending rate to 14.5 percent from 13 percent, the Kenyan lender said on June 14.
“Interest rate spreads in Kenya are among the highest in the region,” Kibaki said. “This has resulted in high cost of credit which has put access to finance beyond the reach of many needy Kenyans.”
Kenya’s government expects economic growth to slow to 5.3 percent this year, from 5.6 percent in 2010, as dry weather curbs farming output and inflation restrains consumer spending.
The central bank’s key lending rate is now at 6.25 percent, half a percentage point above a record low reached in January.
--Editors: Ben Holland, Philip Sanders.
To contact the reporter on this story: Sarah McGregor in Nairobi at firstname.lastname@example.org
To contact the editor responsible for this story: Andrew J. Barden at email@example.com