Capital Markets

Restructured bank loans hit Sh1.38trn in October

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CBK Governor Patrick Njoroge. FILE PHOTO | NMG

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Summary

  • Personal and household loans top the list, with Sh303.1 billion reviewed since March or a third of the total loans whose terms have been changed.
  • About 1.72 million workers lost jobs in three months to June when Kenya imposed a lockdown to curb the spread of the coronavirus, slowing down business activity and triggering large-scale layoffs and pay cuts.
  • Firms in the trade, manufacturing, real estate and agriculture sectors topping the list of business applicants for reliefs.

Banks have restructured loans worth Sh1.38 trillion or 46.5 per cent of the total loan book by the end of October due to the coronavirus-induced economic hardships that have hurt the borrowers’ ability to repay.

Personal and household loans top the list, with Sh303.1 billion reviewed since March or a third of the total loans whose terms have been changed.

This reflects the financial struggles of many workers who had borrowed loans on the strength of their payslips only to later suffer pay cuts, unpaid leave or layoffs in certain cases.

About 1.72 million workers lost jobs in three months to June when Kenya imposed a lockdown to curb the spread of the coronavirus, slowing down business activity and triggering large-scale layoffs and pay cuts.

Data by the Kenya National Bureau of Statistics (KNBS) shows the number of people in employment fell to 15.87 million between April and the end of June compared to 17.59 million in the previous quarter.

The first case of Covid-19 infection was reported in the country in March.

The Central Bank of Kenya (CBK) said lenders reviewed Sh1 trillion of business loans in the period to October, with firms in the trade, manufacturing, real estate and agriculture sectors topping the list of applicants for reliefs.

“These measures have continued to provide the intended relief to borrowers,” CBK Governor Patrick Njoroge said in a statement following a meeting of the regulator’s Monetary Policy Committee (MPC) on Thursday.

Under the CBK’s initiative to offer relief to borrowers, struggling individuals and companies can take a three-month repayment holiday, lengthen the tenure of their loans, or opt to just pay the interest for a period of time. The relief also applies to credit card debt and mortgages.

Dr Njoroge said that key indicators for the second half of this year point to a strong recovery in economic activity following the disruptions witnessed in the second quarter of 2020.

“The resilience in the second half of 2020 continues to be supported by agriculture, a recovery in manufacturing, exports, and services following the easing of Covid-19 restrictions,” he said.

Health Cabinet secretary Mutahi Kagwe on Thursday announced that 10 more patients had succumbed to Covid-19, increasing the death toll to 1,427. He also confirmed 780 new Covid-19 infections, raising the total number to 80,102.