Taxi operators are experiencing a hit from the Covid-19 pandemic as banks close in on car loan defaulters. Recent lock-downs and restrictions have resulted in lower margins for ride hailing apps, slowing down business altogether.
Stanbic bank already put out an advertisement auctioning 72 vehicles, 31 of them being Suzuki Altos which are synonymous with Uber Chap Chap.
Stanbic Bank, in partnership with Uber and CMC motors entered into a deal offering drivers low-cost vehicles valued at Sh 835,000 at 14 percent interest to be paid over three years.
In its latest monthly Purchasing Managers’ Index (PMI) released on June 4th, the lender noted that the country’s business conditions have continued to worsen each month of 2020, with the latest deterioration marked by historical standards.
May saw the headline PMI rise to 36.7, from 34.8 in April. The steep decline in overall business conditions was felt across the Kenyan private sector.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
“We still expect the epicentre of Covid-19 to be felt in Q2, with respect to economic activity. Business conditions have contracted for five consecutive months now,” said Jibran Qureishi, Regional Economist East Africa, Stanbic Bank.
NCBA Group also put up 51 personal and commercial vehicles for sale. The bank recently reported that it had acquired a yard to store repossessed vehicles from their loan defaulters.
In the last week alone, more than 200 vehicles have been waved towards the auctioneers’ hammer, with a majority being saloon cars of 1000cc and 1300cc which are preferred for taxi business.
Most taxi drivers and ride hailing apps have reported losses in the past few months as a result of curfews, lock downs and movement restrictions due to Corona virus.
“I used to take home even Sh 3,000 after re-fueling my car and meeting other expenses. Since corona virus hit us, getting even Sh 1,000 after expenses is a struggle,” Kenneth Kimani, a Bolt driver told the Star.
A report by the Economic Survey 2020 showed that there was an increase in the number of newly registered vehicles from 102,036 units in 2018 to 109,751 units in 2019, a 7.6 percent increase.
Uber on Friday indicated that they will support its drivers, just like any other business affected by the Corona virus pandemic.
“We know it’s especially concerning for anyone who relies on our platform to make a living. As the Covid-19 situation has progressed, we have been in touch with the drivers on our platform to educate them on making suitable arrangements for repayment of vehicle financing loans with their financial institutions,” An Uber spokesperson said.
Uber said it had also reached out to their preferred vehicle partners in a bid to support the affected drivers by reducing the overall cost of the car.
“As this situation progresses we continue to work with our partners on sustainable ways to support them and the community,” The company said.
“As a commitment to supporting drivers, we are providing up to 14 days of financial assistance to drivers and delivery people diagnosed with Covid-19 or ordered to self-quarantine by a doctor or public health authority, including where they have a pre-existing health condition that puts them at higher risk,” it said.
Many business and individuals have reached out to their banks to restructure their current loans.
The central Bank of Kenya (CBK) announced measures to cushion borrowers on March 18. According to CBK Governor Patrick Njoroge, the measures saw Sh 199.1 billion worth of personal/household loans extended by the end of May.
“Total loans that have been restructured are worth Sh679.6 billion and accounted for 23.4 per cent of the total banking sector loan book of Sh 2.9 trillion. These measures have provided the intended relief to borrowers,” Njoroge said.
The ratio of gross non-performing loans (NPLs) to gross loans stood at 13.0 per cent in May, compared to 13.1 per cent in April.