During March 2012, the credit facilities portfolio of local banks extended last month's gain to add around 158 million Kuwaiti dinars and stand at KD 26 billion. During 2011, credit facilities saw a marginal increase of 1.6 percent or around KD 407 million, indicating the challenging business environment for enterprises along with banks' conservative lending policies and the low appetite for credit. Currently, there is no clear sign of potential revival in credit in the short-term as demand for credit by the private sector is not picking up and the continuous delay in implementing the development plan is having an adverse impact on the credit market. Although the slowdown in credit growth is expected to second quarter (Q2) 2012 on the back of tight credit conditions, insolvency problems suffered by local firms, scarce investment opportunities in the local market along with a rise in default risk by distressed and highly indebted firms; credit facilities posted a 1.5 percent growth in first quarter (Q1) 2012 compared to a marginal 0.3 percent increase in Q1 2011.
Personal facilities, the key growth driver of credit and its major component, continued the upward trend for the eleventh consecutive month growing at 0.5 percent in March to reach KD 9.18 billion, hence comprising around 35 percent of banks' loan portfolios. During Q1 2012, personal facilities grew by three percent fuelled by high consumption and robust growth in the retail sector accompanied with the significant increase in public sector salaries.