This archive report was first published on 6 August 2020.
As the Covid-19 pandemic continues to wreak havoc on the global economy, Kenya's banking sector is feeling the pinch. According to data from the Central Bank of Kenya (CBK), commercial banks registered a profit before tax of Sh7 billion in April 2020, a staggering 87.7% drop from the Sh56.8 billion recorded in the same month in 2019.
Experts have attributed the decline in profitability to a surge in non-performing loans (NPLs), which have risen to Sh376 billion, a 24% increase from Sh302.5 billion in April 2019. The CBK's Monetary Policy Committee (MPC) noted that NPL increases were noted in the manufacturing, trade, and personal sectors, due to a subdued business environment.
As people's incomes dwindled, borrowers distressed by the pandemic struggled to service their loan obligations, leading to a sharp rise in bad loans. The situation has been exacerbated by the stringent containment measures aimed at curbing the spread of Covid-19, which have led to business closures and layoffs.
Commercial banks have restructured loans valued at Sh844.4 billion, but the situation remains dire. The banking sector's profitability is expected to continue declining in the coming months, as the effects of Covid-19 persist.
