In ordinary banking mantra, the small borrowers carry a lot more risk in the lending market, and often access credit at exorbitant costs.
Yet recent developments in the credit market show a completely different picture. Sample this. On Tuesday, Central Bank of Kenya Governor Patrick Njoroge told journalists at a press conference in Nairobi that large corporate borrowers have become the biggest bank loan defaulters that require special attention.
Dr Njoroge’s exposition came at a time when reports of mega corporate loan defaults have become common in the Kenyan public domain and – most importantly – some of Kenya’s biggest lenders featured in nearly all the cases.
Whether one is talking of Mumias Sugar #ticker:MSC, Kenya Airways #ticker:KQ, TSS, RVR and retail chain Nakumatt, these banks featured as lenders in nearly all the cases.
Two things arise from the forgoing reality. One, banks need to revisit their methods and tools of assessing customers for purposes of lending in order to reduce the high and rising risk of default, especially among the big borrowers.
The reality of corporate borrowers becoming the biggest defaulters does present a strong case for a change in how the lenders look and assess their customers in the lending market. It all shows the small borrowers may not be the most dangerous in the credit market after all.
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