Commercial Banks have been ordered by the Central Bank of Kenya to provide relief to borrowers on their personal loans, with loans eligible from March 2 extended by up to one year.
Dr Patrick Njoroge, Central Bank of Kenya governor on Wednesday said this was one of the measures that commercial banks will undertake in order to alleviate the adverse economic effects their customers may face from the Coronavirus pandemic (COVID-19).
“While the extent of the adverse effects are still evolving, it is already evident that the impact on some of the customers may be severe,” said Dr Njoroge.
The regulator observed that: “People had borrowed personal loans; some may lose their jobs because of this pandemic, so they may not have the money to service these loans,” Njoroge said, urging borrowers to contact their banks to get the extension.
In a bid to save the private sector, Njoroge ordered for the assessment and restructuring of loans being serviced by medium-sized businesses and corporate borrowers.
“Banks will meet all the costs related to the extension and restructuring of loans,” said Dr Njoroge.
Kenya reported its first case of coronavirus in March, sending panic across markets.
According to NCBA Bank Research, for investors, the institutional ability to cushion businesses from the resultant shocks will be crucial.
“Whereas the fiscal capacity to minimize losses from the pandemic is suspect, markets will be looking for some soothers from the government.”
Coronavirus Outbreak, External Shocks: Kenya Central Bank’s MPC Meeting Touted as ‘Key Risk Event’
As the Kenyan Government takes measures to cope with the coronavirus pandemic, the Monetary Policy Committee of the CBK Meets Monday. Analysts are optimistic there will be a rate cut.
“On a brighter note, monetary policy has room for maneuver and may ease monetary conditions further. However, its effectiveness amid deteriorating investor confidence may be doubtful. This may, therefore, require some unorthodoxy in the conduct of monetary policy including perhaps increased central bank balance sheet to allow for direct liquidity injections or more flexibility in lending regulations for banks,” observes NCBA Analysts.
“On the fiscal side, the narrow fiscal space will require appreciable re-adjustments by the government if to provide any respite for businesses and individuals…So far, investors’ confidence is fragile. As a result, demand for sovereign risk has accelerated as risk aversion feed preference for liquidity,” they add.
On the other hand, Genghis Capital Analysts state that: “While the MPC will be keen to maintain price stability with inflation and currency under pressure, growth prospects are waning and we believe this will be the focus of discussion.
We suspect PSCG remains low as per data to be released by the MPC on the day of the meeting, coupled with the slowdown in business activity, which will have a consequence on the final rate cut decision. In conclusion, we anticipate the MPC to cut the benchmark rate by 75bps to 7.5% in the March meeting on the back of mounting global risks.”
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