This archive report was first published on 7 May 2020.
As the COVID-19 pandemic continued to wreak havoc on the Kenyan economy in April 2020, the Central Bank of Kenya (CBK) took swift action to protect businesses. The seven largest banks in the country – Kenya Commercial Bank (KCB), Equity Bank, NCBA Bank, Co-operative Bank, Absa Bank Kenya Plc, Standard Chartered Kenya, and Diamond Trust Bank (DTB) – restructured loans amounting to Ksh176 billion.
According to CBK Governor Dr. Patrick Njoroge, who appeared before the COVID-19 Senate Ad Hoc Committee on Coronavirus, the banks received numerous requests for loan restructuring and extensions. By the end of March, 6,430 personal loan accounts had requested an extension of tenor on loans worth Ksh9.85 billion, while 1,841 business accounts had requested a restructuring of loans worth Ksh81.55 billion.
Dr. Njoroge noted that the extension of tenure and restructuring of the two classes of loans represented 0.35% and 2.87% of the total loan book value, respectively. He warned that requests for loan extensions and restructuring were expected to increase in the coming months if the pandemic continued to spread.
Most of the business loans restructured were in the Tourism (31%), Real Estate (17.2%), Building and Construction (17.0%), and Trade (12.4%) sectors. In contrast, the personal loan accounts extended accounted for 1.2% of the total household sector gross loans worth Ksh811.9 billion as of March 2020.
CBK also allowed eleven commercial banks and one microfinance bank to access Ksh17.59 billion from their minimum capital requirement kitty to boost their operations. This accounted for 50% of the Ksh35.2 billion freed when CBK reduced its Cash Reserve Ratio (CRR) requirements by 1% from 5.25% to 4.25%.
Dr. Njoroge stated that the increased demand for funding from the banking sector was evident, with 50% of the Ksh17.6 billion drawn from the CRR kitty being used in just one month. The economic sectors that benefited most from the Ksh17.6 billion were Tourism (45.58%), Agriculture (16.7%), Real Estate (11.94%), and Trade (10.37%).
Dr. Njoroge acknowledged that Micro, Small and Medium Enterprises (MSMEs) had borne the biggest brunt during the pandemic period. He revealed that the regulator was working with banks, the government, and development partners to craft a plan to help MSMEs overcome the crisis. Plans included access to concessionary and affordable funds, a credit guarantee scheme, and re-skilling and retooling of MSMEs when the COVID-19 pandemic subsided.
