Loan defaults have risen to Ksh441.8 billion in just eight months, according to data by the Central Bank of Kenya (CBK).
The increase in Non-performing Loans (NPLs) reverses the gains made in the post-Covid economic recovery efforts so far.
As of February 2021, the NPLs stood at Ksh444.2 billion, before going down further to Ksh433.3 billion.
“Repayments and recoveries were noted in the tourism, restaurants and hotels and building and construction sectors,” said CBK said in a statement.
Despite the increase in NPLs, most lenders recorded increasing profits in the eight-month period. According to the data, profits before tax grew by 57.2 percent to Ksh127.8 billion in the review period from Ksh81.3 billion a year earlier.
Currently, banks are required to make provisions for expected loan losses rather than those already incurred following the adoption of the more conservative International Financial Reporting Standards (IFRS 9).
Recently, CBK suspended the listing of defaulters of loans below Ksh5 million on Credit Reference Bureaus (CRBs) for a period of 12 months.
In a statement to newsrooms on Monday, CBK Governor Patrick Njoroge said the directive applies to all those borrowers whose loans were performing previously, but have become non-performing from October 1, 2021.
Further, CBK ordered CRBs not include in any credit report, any negative credit information for loans of a customer less than Ksh.5 million submitted to the CRB from October 1, 2020 to September 30, 2021, for a period of 12 months from October 1, 2021 to September 30, 2022.
This is one of the directives President Uhuru Kenyatta issued on October 20, 2021, during the Mashujaa Day celebrations in Kirinyaga County.