The report reveals that the banking industry’s assets have scaled up by 8.2 percent to ksh 6.5 trillion in 2022 from ksh 6.0 trillion in 2021.

The sector also recorded double digits albeit with some moderation, partly reflecting the transmission of monetary policy tightening stance.

The growth was stronger in 2022, growing by 12.5 percent in the 12 months to December 2022 with the stock of credit growing to KES. 3.4 billion by the end of December 2022.

The report attributes the double-digit growth to the reinvigoration of private sector activity.

‘’As asset quality improved, the industry continued to increase its loan loss provisions to cover expected credit losses. Loan loss provisions rose by 16.2 percent to KES. 68.8 billion in 2022 compared to KES. 59.2 billion in 2021,’’ the report indicates.

Players in the sector have marveled at the steady growth witnessed in the economy despite the drawbacks that hit the sector in 2022 in the heights of the electioneering period.

”Banking industry developments in 2022 show that the industry registered impressive growth. Particularly for the deposit-taking microfinance banks, while their asset quality concerns posed challenges, there were notable operational efficiency gains that enabled profitability growth in the market segment,’’ said KBA CEO Habil Olaka.

During the period, the economy grew by 4.8 percent above the sub-Saharan Africa average of 3.9 percent.

On the flipside however, the report reveals that the banking industry outlook remains clouded by several interconnected risks that include persistent inflationary pressures, the effects of tighter monetary policy conditions on credit flows and by extension economic activity, the tax laws in the Finance Act 2023, among others.

The Asset quality of deposit taking microfinance banks continued to deteriorate to 14.5 percent in 2022 from 13.7 percent, as the coverage ratio also edges further downwards to 2.3 percent in 2022, from 14.8 percent as of 2021, according to the report.

The sector’s total liabilities continued to scale downwards however its structure remained stable with customer deposits – the deposits-to-liabilities ratio – remaining dominant at 75.4 percent of the total liabilities, while borrowing and other liabilities accounted for 15.1 percent, and 9.5 percent respectively.

Overall, the total income of the sector contracted by 1.6 percent to KES. 13.2 billion compared to a 2.3 percent growth it registered at end of 2021 while total expenses edged upwards, albeit marginally from KES. 12.9 billion in 2021 to KES. 13.1 billion in 2022.