Tour operators face blacklisting over Sh1bn non-performing loans

Hotels and tour operators face imminent blacklisting by credit reference bureaus as the Tourism Finance Corporation (TFC) steps up efforts to recover nearly Sh1 billion bad loans.

The State agency, which offers cheap loans to operators in the tourism industry, says it will share with the bureaus details of borrowers who owe it Sh837 million disbursed over a 10-year period.

TFC, formerly Kenya Tourist Development Corporation, was set up to provide cheap development funding and advisory services for long-term investments in the tourism industry.

The agency extends loans to tourist sector investors at a low interest rate of nine per cent per year and has funded over 200 projects in all the 47 counties since its inception.

The facilities which have benefited from the fund include cottages, hotels, restaurants curios and other tourism-related businesses.

TFC’s acting managing director Jonah Orumoi said in an interview that the partnership with credit reference bureaus will ensure transparency and accountability in the sector, not only bringing down non-performing loans but also improving on their overall loan and rent collection.
He noted that in the past two months TFC had recovered a good amount of bad loans.

“In February 70 per cent of the portfolio was non-performing but we have been able to reduce this to just 30 per cent. The lack of a board had been a major hindrance to the corporation’s efforts to make any recoveries over the past two years,” he said. The leadership vacuum at the boardroom also took its toll on investors with requests for low-interest loans piling up to more than Sh2 billion by December 2014.

Mr Orumoi said the board had approved stringent measures which it came into office in October last year as a way to help the parastatal adopt a new and favourable identity to help deliver 65,000 new beds under the Vision 2030 national development blueprint.

“In addition to working with the CRB, we have also instituted other measures to ensure that the remainder of the non-performing loans perform including trying to restructure the repayment plans taking into consideration the industry’s performance,” he said.

TFC is also looking to improve rent collection for its Utalii House building within the CBD which Houses various government ministries, departments, parastatals and businesses.

“At the start of the year about 30 per cent of our tenants had not paid their dues over a long period of time but we have been able to backdate the rent and are still working on ensuring compliance among the remaining 10 per cent,” he said.

Mr Orumoi added that the recovery of loans from investors and rent arrears will enable TFC to boost its revenue base, enabling it to support other tourism investors.