Companies listed on the Nairobi bourse have come under sharper financial strain over the past two years, with even some long-profitable firms now showing distress. That shift has made lenders more selective and has increased the risk of administration for weaker borrowers.
Banks have said they are less willing to finance companies that cannot show profitable returns in the market. Where credit is still available, they are leaning toward term loans and overdrafts backed by stronger security and lower risk.
The pressure has been compounded by lending rates that stood at 13 percent in 2018. For distressed firms seeking debt financing or restructuring, that has made borrowing more difficult and has reinforced the view that they are risky borrowers.
Most companies still depend first on internal funding, including shareholder equity, retained profits, and loans from shareholders or directors. Larger firms may also turn to bank-based or market-based financing, but the heavy reliance on bank credit has remained a concern in official reports for several years.
The article also highlights a wider problem in capital markets: the tension between investor protection and capital formation. Poorly run companies can publish false or misleading reports, leaving investors exposed to losses based on inaccurate information.
The Capital Markets Authority is meant to protect investors and penalize companies that issue false or misleading disclosures. Even so, the article questions why systemic risks continue to persist and calls for closer scrutiny of listed companies, including timely filing of accurate financial statements.
The CMA had recently disclosed a list of companies trading below required capital and liquidity levels. The piece says a listed company should ideally have current assets at least twice its current liabilities.
Disclosure of relevant information remains a key regulatory tool, but its value depends on enforcement.
Baston Woodland, Advocate of the High Court of Kenya.
