Presidnet Uhuru Kenyatta. [Photo|buzzkenya.com]
President Uhuru Kenyatta’s begins his second term in office at a time when the economy is facing a myriad of challenges.
Nearly all sectors are experiencing hiccups, mainly caused by election jitters. The prolonged presidential election after nullification caused tension that piled more pressure on productive sectors of the economy.
Manufacturing has slowed down, the stock market has been shaky, consumption has dropped while retail has suffered. Also, it is the real estate sector, where construction of new houses has been largely put on hold while demand for finished housing units has stagnated.
This has a direct impact on mortgages as well. Thousands of jobs have been lost in the process.
Kenyan have had to tighten their belts. There has been a credit squeeze in the market leading to tightening the supply of money within the SME sector, thanks to interest rates capping. When banks adjusted to comply with the capping law, they seemed to punish the low end of the market perceived to be high risk.
This segment was the bread and butter of banks.
The law snatched the fat slices from their jaws. The impact is undeniably painful for everyone banks, customers, and the government. Banks have recorded significant drops in profits attributable to this law, while most small businesses are struggling with financing. The credit issue should be top of the agenda for President Uhuru Kenyatta.
We should expect him to set in motions plans to repeal the legislation, which he signed into law last year. That seems the quickest way out as the banking cartel is not bulging. Opening up credit taps will stimulate faster growth.
The next priority is to cultivate political stability and national unity to inspire investors. Both local and foreign investors are wary of investing in Kenya for the long term and need assurance that their investments are secure.