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NAIROBI Authentic Shayne Gostisbehere Jersey , May 2 (Xinhua) -- Commercial banks have raised their stake in Kenya's domestic debt by 4 percent in the last two months as they seek to make up for reduced earnings in a tough lending environment.


The increase from 51 percent at the end of February to 55 percent at the end of April means the banks have lent more money to the government through Treasury bills and bonds, Central Bank of Kenya (CBK) data shows on Tuesday.


Kenya's domestic debt currently stands at 19 billion U.S. dollars up from slightly above 18 billion dollars in February.


This means commercial banks have lent to the government some 10.5 billion dollars with the remainder being shared by parastatals (6 percent), insurance companies (7 percent), pension funds (28 percent) and individual investors.


Kenya introduced changes to commercial banks' lending regime last September, capping interest rates at 4 percent above the CBK rate, which currently stands at 10 percent.


The law pushed down lending rates of some commercial banks by half as the charges before the law ranged at between 18 and 28 percent.


Though introduced in the third quarter of 2016, commercial banks earnings declined last year Authentic Claude Giroux Jersey , with the drop being blamed on the law.


Kenya Commercial Bank (KCB), Barclays Bank, Equity Bank, NIC Bank and Stanbic are among the big banks in the East African nation which recorded decline during the period.


KCB, the country's largest bank by assets, posted a flat net profit of 191 million dollars, NIC Bank recorded a 3.3 percent decline in earnings Authentic Nolan Patrick Jersey , Barclays Bank 12.6 percent and Stanbic Bank 9.9 percent.


Kenya Bankers Association chief executive officer Habil Olaka recently said lenders are currently diverting more funds to Treasury bills and bonds and other opportunities in the forex market rather than lending to borrowers


"The government debt borrowed through Treasury bills and bonds is less risky and more profitable in the wake of the rate capping law," he said.


On the other hand, private sector lending growth fell to 4.3 percent in 2016 compared to more than 17 percent a year earlier, according to the Central Bank.


Besides investing in government securities, Kenyan banks have embarked on other measures to protect their profits in the changed environment, which include closure of branches and moving services online and on mobile phones.


At least 10 financial institutions out of the 42 that operate in Kenya have announced job cuts and closure of branches, with close to 2 Authentic Wayne Simmonds Jersey ,000 workers being affected and 20 branches closed.


Kenya has further witnessed a number of acquisitions in the sector, especially in the second half of 2016 and early this year, involving mainly smaller banks that have found the going difficult.


The International Monetary Fund (IMF) is among leading institutions that have called on Kenya to do away with the capping of interest rates, noting it is not good for Kenya's economic growth.


Analysts reckon that the full impact of the law will be felt this year, therefore, commercial banks are set to lend more to the government to protect their income as they engage in more cost-cutting measures.

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