Banks to consider impact of projects before funding

Commercial banks in Kenya are now required to consider the environmental, social and economic impact of the projects they intend to finance, before they provide funding.

Speaking during the launch of the sustainable finance initiative by the Kenya Bankers Association, the governor of the Central Bank of Kenya, Dr Patrick Njoroge, said banks should no longer primarily focus on how much profit they make for their shareholders but rather the long term impact of their businesses.

The commitment to sustainable finance initiative means commercial banks will focus on ethical leadership and governance, responsible use of financial and natural resources as well as the social, economic and environmental impact of projects they fund.

This comes barely two weeks after CBK announced how treasury bills are increasingly becoming a pointer to lower interest rates and yields on Kenya’s 182-day and 364-day.

Interest rates on T-bills have been on the decline since late October when yields on short-term government debt were above 20 percent.

Speaking then, Joshua Oigara, the Chairman of the Kenya Bankers Association and Group Chief Executive Officer of Kenya Commercial Bank (KCB) said that all commercial banks were expected to lower their lending rates in line with this latest reduction in interest rate.

Interest rates had soared above 25 percent and this was caused by a dramatic rise in yields on government Treasury bills, which are a key determinant of lending rates.

To bring down the cost of money, CBK has been injecting fresh liquidity into the money markets with its latest intervention being its injection of Ksh6 billion.

The CBK had offered bills worth Ksh12 billion and accepted bids worth Ksh16.5 billion.

It, however, got offers worth Ksh45.96 billion.

Kenya joins Nigeria, South Africa and India in adopting the sustainable finance initiative developed by the United Nations Environmental Program (UNEP).