Loans to transport companies increase at a record pace thanks to the resumption of travel

Capital markets

Loans to transport companies increase at a record pace thanks to the resumption of travel


Public service vehicles ready for passengers at Tea Room Stage, Accra Road, Nairobi on Monday, December 21, 2020. PHOTO | DENNIS ONSONGO | NMG

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Summary

  • Bank lending to the transport and communications sector rose by the widest margin of 24.1% in the 12 months to February to hit a record high.
  • Transport and communications are among the sectors that recorded a strong rebound following the easing of restrictive measures after two years of the pandemic.
  • The transport and storage industry grew by 13% in the third quarter, according to data from the Kenya National Bureau of Statistics (KNBS).

Bank lending to the transport and communications sector rose by the widest margin of 24.1% in the 12 months to February to a record high, reflecting improved performance during the resumption of national and international trips.

Data from the Central Bank of Kenya (CBK) shows that total lending to the sector in February was 270.0 billion shillings, compared to 217.6 billion shillings in the same month last year.

Transport and communications are among the sectors that recorded a strong rebound following the easing of restrictive measures after two years of the pandemic.

The transport and storage industry grew by 13% in the third quarter, according to data from the Kenya National Bureau of Statistics (KNBS).

Visitor arrivals at Jomo Kenyatta International Airport, for example, rose to 69,236 in January from 40,408 in the same month last year.

Restrictions on domestic and international travel have hurt airlines, tour operators and public service vehicle (PSV) investors who have seen lower revenues and losses in some cases.

PSVs have also been hit by trends of working from home and half-capacity transport to ensure social distancing rules which were scrapped last year.

The growth of credits to the transport and communications sector occurred despite the recording by banks of significant payment defaults among customers active in the industries.

Bad debts in the transport sector, for example, increased by 10.8% or 4.1 billion shillings to reach 42.2 billion shillings last year.

The transport sector has come under pressure recently due to a weaker shilling, fuel shortages and escalating commodity prices.

Prices per liter of petrol and diesel reached Sh144.6 and Sh125.5 in Nairobi.

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