Kenyans with loans with the Kenya Commercial Bank amounting to more than Ksh120 billion have had their loans restructured to to negative effects of Covid-19 to the economy.
In May, the bank reported that it had restructured loans worth Ksh80 billion, and the 50 percent shift within a month is a testimony of the rising economic challenges posed by Covid-19 pandemic.
Among the biggest beneficiaries included SMEs, large firms and home buyers, who have found it hard to service their loans during this period.
“We have restructured more than Sh120 billion of loans so far across our region,” said KCB’s chief executive Joshua Oigara.
The restructured amount is equivalent to 21.6 percent of the KCB’s Ksh553 billion loan book as of the quarter ended March 2020.
According to Oigara who spoke during a virtual AGM with shareholders, the banking sector is facing challenges such as reduced lending, lower transaction volumes, higher provisioning for bad debt and thinner margins on existing loans.
A week ago, Central Bank of Kenya (CBK) Governor Patrick Njoroge said that 75 percent of micro, small and medium-sized enterprises would be in a critical state by the end of June due to the effects of the novel Coronavirus on the economy.
This, Njoroge said, is according to a survey which was conducted at the end of April.
The businesses, the CBK boss said, risk shutting down their operations due to limited funds to even pay suppliers.
“Whatever policy action put in place to help MSMEs needs to go beyond finance, into ‘finance plus’, including linkages to other markets, ” said Njoroge.
As part of the measures to support businesses, Njoroge said, Kenyans should be ready to explain challenges they are experiencing with their banks for those still servicing loans.
“In line with the additional emergency measures announced by CBK on March 18 to provide relief to borrowers, the repayment period of personal/household loans amounting to KES 102.5 billion, or 13.1 per cent of the banking sector personal/household gross loans, had been extended, by the end of April.
“For other sectors, a total of KES 170.6 billion had been restructured mainly to Trade (43.5 per cent), Manufacturing (13.6 per cent), Tourism (9.0 per cent) and Real Estate (9.8 per cent). Total loans restructured worth KES 273.1 billion accounted for 9.5 per cent of the total banking sector loan book of KES 2.8 trillion. These measures have begun to provide the intended relief to borrowers.”
CBK further retained its 2020 economic outlook at a 2.3 per cent growth rate having lowered it from 3.4 per cent in March.
“Nevertheless, growth is expected to weaken in the second quarter, due to the adverse impact of the containment measures, particularly in transport and storage, trade and accommodation and restaurants. As a result, real GDP growth in 2020 could slow to about 2.3 per cent from 5.4 per cent in 2019,” said Njoroge.