This archive report was first published on 14 May 2020.
Published on May 14, 2020, a survey conducted by the Kenya Bankers Association (KBA) reveals that 67% of borrowers prefer a one-year extension on their loans.
This indicates that many Kenyans are optimistic about their income-generating streams recovering within a 12-month time-frame.
According to the survey, dubbed 'Spillovers and Feedback Loops: The Banking Industry's Response Scenarios to the Effects of COVID-19 Pandemic', majority of applicants will also seek revision of interest rates with interventions by the Central Bank of Kenya (CBK) expected to culminate in lower rates for borrowers.
However, the survey notes that in view of the elevated risk profile of customers arising from the shocks associated with the pandemic, majority of banks are likely to remain cautious.
This aligns with CBK statistics, which show that the leading seven banks in the country restructured Ksh176 billion worth of loans in April alone.
Moreover, 94% of banks expect significantly slowed economic growth, which will negatively affect customers both at household and commercial levels.
Additionally, 65% of the surveyed banks expect customers to default on their loans, with the quoted lenders forecasting Non-Performing Loans (NPLs) will increase to 14% from the current level of NPLs to gross loans of 12.4%.
Dr. Habil Olaka, KBA Chief Executive Officer, stated that CBK's move to reduce required mandatory reserves has substantially made it easier for banks to restructure loans for their customers.
Dr. Olaka also indicated that a financial crisis in Kenya is unlikely due to the fact that the majority of banks had high levels of liquidity during the rate cap period, which effectively lifted at the end of 2019 with banks increasing their lending activity just two months before the pandemic.
On the other hand, Jared Osoro, KBA Research and Policy Director, said that the banking sector is already feeling the effects of the slowdown in the economy.
