(Repeats for additional clients)
LONDON Feb 3 NAIROBI, Feb 3 (Reuters) -
Activity in Kenya's private sector increased modestly in January
as banks curtailed new lending to firms in the wake of an
interest rate cap imposed last September, a survey showed on
The Markit Stanbic Bank Kenya Purchasing Managers Index
(PMI) fell to 52.0 percent in January from 54.1 in the previous
month, staying above the 50.0 line that divides growth from
"Since the legislation to cap interest rates came into
effect ...we can now see signs of distress within the private
sector as ...(survey respondents) lament about cash shortages,"
said Jibran Qureishi, regional economist for East Africa at
The government capped the lending rate for commercial banks
at 400 basis points above the central bank rate, a measure
economists said at the time risked hurting economic growth by
discouraging loans to smaller borrowers deemed more risky.
"A further slowdown in private sector credit growth and poor
weather conditions will most likely lead to a downward trend in
the PMI over the coming quarter," Qureishi said.
Private sector credit growth started falling at the end of
2015 after the central bank toughened supervision. It was
worsened last April when mid-sized lender Chase went into
The central bank said this week the drop in credit growth
had bottomed out, with the year-on-year growth standing at 4.3
percent last December, close to the level of the previous two
The survey found new orders for firms rose at a slower pace,
while costs hit an eight month high.
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(Reporting by Duncan Miriri; editing by John Stonestreet)
(Editing by Jeremy Gaunt)