Loans extended by commercial banks to companies and individuals working in the mining and quarrying sector more than doubled to KSh48 billion in the year to July, following the lifting of the four-year freeze on mining permits.
This was a 106.7 per cent growth from the KSh23.2 billion the industry borrowed in a similar period last year, and a 45 per cent rise from the KSh33 billion in April, when the government lifted the freeze on issuance of new mining permits, data from the Central Bank of Kenya (CBK) shows.
The lifting of the freeze allowed at least 400 new companies to venture into different activities within the mining industry, including mineral prospecting, mining, and marketing or exporting of minerals and related products.
Players in the industry argue that the freeze lift may have increased confidence in the industry, driving up the credit extended to them by commercial banks and other lenders in the country.
“The lifting of the new permits injected some confidence in the mining and quarrying subsectors, and that did impact the credit going into the sector,” said Patrick Kanyoro, the Kenya Chamber of Mines chairperson.
In addition to the trickle-down impact of the permit freeze lift, Mr Kanyoro argues that the rise in credit demand and uptake by the sector is also stemming from the growth in construction activities in the country.
“One of the likely reasons for the growth in credit for the sector is the growing construction, especially for the affordable housing as well as the general development of infrastructure across counties,” he told The East African.
“There is renewed confidence for support for development minerals like limestone, pozzolana, aggregates, among others, and linkages for activities such as transport and warehousing.” Following the lifting of the freeze on the permits, the sector is regaining momentum, triggering demand for credit.
“Since the sector is slowly picking up, there is a need for increased asset finance for trucks, backhoes, excavators, among others,” Kanyoro said.
The mining and quarrying industry is currently one of the smallest contributors to the country’s gross domestic product (GDP), having yielded Ksh106 billion only last year, a decline of 6.5 percent compared to 2022 and about 0.6 percent of the total GDP.
In the quarter to June, the sector generated Ksh26.9 billion, a 21 percent growth from the Ksh22.1 billion it produced in the first quarter of the year, but a 2.7 percent decline compared to last year, latest figures from the Kenya National Bureau of Statistics show.
