Not Out of the Woods, Kenyan Banks Restructure KSh1.63 Trillion by Dec

Fiscal Discipline ‘Crucial’ in Managing Kenya’s Deficit

Financial institutions have deferred and restructured loans worth Ksh 1.63 trillion, equivalent to 54.2% of the total banking sector loan book by the end of December, under the emergency measures to facilitate the borrowers in Covid-19 pandemic.

The Central Bank of Kenya said the total banking sector loan book was Ksh 3.0 trillion by the end of December.

Out of the restructured amounts, personal and household loans amounting to Ksh 333.0 billion (39.6 per cent of the gross loans to this sector) have had their repayment period extended. 

For other sectors, a total of Ksh 1.29 trillion had been restructured mainly to trade (21.3 per cent), manufacturing (20.4 per cent), real estate (15.4 per cent) and agriculture (12.4 per cent). 

“These measures have continued to provide the intended relief to borrowers,” said Dr Patrick Njoroge, Chairman MPC and Central Bank Governor on Wednesday. 

On March 18, 2020, CBK announced the loan extension and restructuring scheme with an aim to preserve the solvency of the borrowers during temporary economic challenges.

“Of the Ksh 35.2 billion that was released by the lowering of the Cash Reserve Ratio (CRR) in March, Ksh 32.6 billion (92.7 per cent) has been used to support lending, especially to the tourism, trade and transport and communication, real estate, manufacturing and agriculture sectors,” said CBK.

Long term prospects for the banking sector remain positive according to Genghis Capital Analysts as the banks invest in the efficiencies of technology, diversify their businesses and increase their market share locally and regionally.

However, they “face headwinds especially with the restructured loan book (Ksh 1.4 trillion, 46.5% of total sector loan book) that were affected by the pandemic’s effect on customer repayment plans,” they note adding that “Due to these concerns coupled with the weak macro environment and the likelihood of slower business investment, it is likely the sector may remain cautious on lending especially factoring in that the sector is not able to price risk despite the repeal of the rate cap in 2019.