This archive report was first published on 7 May 2020.
On March 23rd, 2020, the Monetary Policy Committee of the Central Bank of Kenya made a crucial decision to lower the Cash Reserve Ratio for commercial banks to 4.25% from 5.25%. This move aimed to inject more cash into the banking system, which has been severely impacted by the COVID-19 pandemic.
By April, the Central Bank of Kenya had granted approvals to 11 commercial banks and one microfinance institution to access KSh 17.59 billion in cash and deposits held in its reserves. This amount accounts for 50% of the KSh 35.2 billion that was made available to the banking sector.
“With 50% having been used in just one month, this depicts the increased demand for funding from the banking sector,” said Dr. Patrick Njoroge, CBK Governor, during a presentation before the Senate Ad Hoc Committee on the COVID-19 situation.
The funds were primarily used to support the tourism, agriculture, real estate, and trade sectors, with tourism accounting for the largest portion at 45.58%. The sector was severely impacted by the pandemic, with KSh 8,018,521 being used to support tourism, restaurants, and hotels.
Dr. Njoroge also noted that the banking sector has started to feel the adverse impact of COVID-19, with requests for loan extensions and restructuring expected to increase in the coming months.
As of April, Kenya's 7 largest banks had restructured loans amounting to KSh 176 billion. The Central Bank of Kenya is working with banks, the government, and development partners to provide access to affordable funds and facilitate easy access to commercial credit for small businesses.
