10 percent of Kenyans are unable to service their loans at all while another 13.6 percent are falling significantly behind in their payment obligations.
This is according to a new survey by financial recovery firm Collect Pro, which discovered that half of Kenyan households have struggled to keep up with their loan payments due to the negative effects of the Covid-19 pandemic.
Dubbed the Indebtedness Survey, the report reveals that quarter of the respondents (24.9 percent) are slightly behind in their loan servicing obligations. A third (37.5%) have already taken advantage of the moratorium on repayments to ease their repayment burden.
“Those who fall in the categories of non-payment (10%), significantly behind (13.6%) and slightly behind (24.9%) should expect a change in their credit rating with their banking institution and possible listing with the Credit Bureaus,” said Timothy Gathima, Founder of Collect Pro.
This group of borrowers almost exclusively fall within the personal/household categories of the loan portfolio, according to the study.
“This group of borrowers almost exclusively fall within the personal/household categories of the loan portfolio and will represent new Non-Performing Loans (NPLs) in that category of loans, becoming a burden to banks and a risk to non-bank lending institutions in the near future,” he added.
A secondary loan-defaulter risk category was those with full time jobs (58.9%) but also had a side hustle (35%) and were borrowing to support their small and micro enterprises.
though commercial banks dominate the lending space (58.3%),there is an increase in the number of individuals borrowing from savings and credit cooperatives(37%),friends and family(31.9%),business credit(15.7%)and from mobile lenders(25.9%).
“The survey confirmed that borrowers are opting for non-bank lending institutions despite high lending rates for short-term access to credit. This kind of debt accrues fast, thrusting the individual into a vicious circle that reinforces the adage – borrowing Peter to pay Paul,” added Mr Gathima.