Data from the CRBs show that the accounts negatively listed stood at 4.6 million out of the 15 million accounts, reflecting a jump from 3.2 million accounts in April last year.
The bulk of the new listings is for mobile digital loans despite the government having frozen the blacklisting of defaulted loans below Sh1,000 from April to December last year.
Workers and businesses defaulted on bank loans worth Sh93 billion in the year to February following the imposition of stringent measures to contain the spread of the coronavirus.
A third of Kenyan loan accounts are negatively listed as defaulted with the country’s credit reference bureaus (CRBs) in an economy where Covid-induced job cuts and business closures have pushed thousands of people into a debt trap.
Data from the CRBs show that the accounts negatively listed stood at 4.6 million out of the 15 million accounts, reflecting a jump from 3.2 million accounts in April last year.
The bulk of the new listings is for mobile digital loans despite the government having frozen the blacklisting of defaulted loans below Sh1,000 from April to December last year.
The suspension was aimed at cushioning Kenyans from the economic fallout that came with Covid-19.
The defaulted loan accounts were listed this year.
Workers and businesses defaulted on bank loans worth Sh93 billion in the year to February following the imposition of stringent measures to contain the spread of the coronavirus.
Data from the Central Bank of Kenya (CBK) shows that non-performing loans (NPLs) rose from Sh351 billion in February 2020 to Sh444 billion at the end of February this year — the sharpest one-year increase in recent history.
But this excludes defaults from unregulated digital mobile lenders who were also barred from forwarding the names of loan defaulters to CRBs.
It followed public outcry over widespread misuse of the credit information sharing (CIS) mechanism by the unregulated digital mobile lenders.
Their freeze from CRBs signals that blacklisted loan accounts could have been higher.
“The number of Kenyans currently negatively listed are 4.6 million against the total records of 15 million,” said Joseph Nyaga, the CEO TransUnion, one of Kenya’s three CRBs. He said the majority of the negative listings were for loans tapped through mobile phones.
The rising number of blacklisted loan accounts will jeopardise the chances of millions of Kenyans being able to borrow more to grow their businesses or for projects.
But the CBK has offered the blacklisted borrowers breathing space after it froze the sharing of information of those who have defaulted on loans of below Sh5 million up to end of September next year.
The CRB listing relief is part of a stimulus package to cushion distressed businesses and households from the effects of the Covid-19 pandemic, which has hit consumer demand and forced businesses to shed jobs and cut back their operations.
But the CBK reckons the move could constrict private sector lending growth.
Industries and other businesses had cut down on their activities in response to the infectious disease, leading to job cuts and unpaid leave for retained staff as profitable firms moved into losses.
This saw workers who had tapped mortgages and unsecured loans for purchase of goods such as furniture and cars and expenses like school fees default. Unsecured loans are given on the strength of one’s salary.
Firms that had borrowed based on the forecast of cash flows have also been struggling to repay their bank loans.
Nearly 730,000 jobs were lost last year when Kenya imposed coronavirus-induced lockdowns that led to layoffs and pay cuts, but the country’s economy is presently recovering.
Growth slid to negative 0.3 percent last year from 5.0 percent in 2019.
Recovery has started, but there are fears the pace could be curbed by a shortage of Covid-19 vaccines and new waves of infections. Growth is expected to be 6.1 percent this year and 5.6 percent in 2022, according to the CBK. The non-performing loans dropped from Sh444.2 billion in February to Sh435 billion in September.
The CBK has warned that commercial banks could restart rationing loans following the suspension of blacklisting of defaulters with Sh5 million loans and below.
The regulator says banks may shun lending to individuals and small traders at a scale last witnessed between September 2016 and November 2019 when Kenya capped interest rates.
Bankers say a lack of credit reference could contribute to soaring costs of loans and stall lending to businesses due to incomplete borrowers’ information.
The suspension is the second since Kenya reported the first case of Covid-19 last year.
The CBK ordered a six-month suspension of CRB listings in April last year as part of the measures to cushion borrowers hit by the pandemic.
The moratorium lapsed in October, allowing financial institutions to start sending names of defaulters to the CRBs. Lenders, however, offered defaulters 90 days from October 1 to start repaying their loans or get blacklisted.
