This archive report was first published on 29 June 2020.
As the COVID-19 pandemic continues to affect the economy, the Central Bank of Kenya (CBK) has advised banks to renegotiate loan repayment terms with distressed borrowers. However, experts warn that this may lead to a surge in non-performing loans.
According to CBK figures, commercial banks have restructured personal loans estimated at KSh 199 Billion or 25% of a personal loans portfolio worth KSh 795.2 Billion. In total, loans worth KSh 679.6 Billion disbursed by commercial banks, out of the banking industry's loan book worth KSh 2.9 trillion, have been restructured.
CBK Governor Dr. Patrick Njoroge encouraged distressed firms and individuals to seek fresh repayment deals with banks. He also disclosed that following a reduction in the Cash Reserve Ratio (CRR) to 4.25% from 5.25%, some KSh 35.2 Billion has been availed to banks to directly support borrowers that are distressed as a result of COVID-19.
Reginald Kadzutu, Head of Retail at Zamara, expressed concerns that the moratoriums may not address the underlying issues. He said,
