Allow 12-month Moratorium on Loans  Below KSh 5 Mn, President Kenyatta

President Uhuru Kenyatta has announced that negative CRB reports listed from October 2020 will not apply for another 12 months.

President Uhuru Kenyatta on Wednesday told financial and lending institutions to allow a moratorium of 12-month on payment of instalments in respect of all term loans outstanding as from October 2020 to date. 

Kenyatta disclosed that besides having offered a reprieve of six months from April to September 2020, particularly to MSMEs during the pandemic period,  they continue to struggle following the adverse effects of the pandemic. 

The directive applies to loans worth less than KSh 5million. 

“I further order the National Treasury, in consultation with all stakeholders, to secure the following additional measures to provide further space to the recovery of MSMEs: 

The relevant authorities will, for loans less than KSh.5 million, effect a moratorium of listing in CRBs for a period of 12 months to end September 2022; and

Further, borrowers with loans below KSh. 5 million listed with CRBs from October 2020 to date will not have that listing incorporated in their credit reports for the next 12 months, ending September 2022.” 

Kenyatta also urged Treasury to engage all-digital payment providers with the aim of deepening and expanding the use of digital payment channels, especially by small-scale traders and households. 

According to Cytonn Investment’s, the asset quality for listed banks deteriorated in the fiscal year ’2020, with the Gross Non Performing Loans (NPL) ratio rising by 3.0 per cent points to 13.5 per cent from 10.5 per cent in FY’2019. 

“The deterioration in asset quality was due to the coronavirus-induced downturn in the economy, which led to an uptick in the non-performing loans,” Cytonn noted.  

However, according to the latest data from the Central bank of Kenya, the rate of NPLs in the country eased further by 10 basis points in August to 13.9 compared to 14 per cent in June.  

This was largely due to an improvement in the repayments and recoveries in the tourism industry.

Consequently, a recent survey by Deloitte showed that banks in the region are highly exposed to bad loans and urged them to factor in the risks and exposures.

“Regular monitoring of loan performance by clients is essential in determining the trend of clients’ behaviour. This will allow banks to predict defaults early and set up mitigation procedures such as reduction of overdraft amounts or funding more where the business requires additional capital despite the overall market performance,” said Deloitte.

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