Habil Olaka, chief executive of the Kenya Bankers Association (KBA). FILE PHOTO | NMG Kenyan lenders expected to meet all charges related to extension and restructuring of loans in addition to waiving all fees for balance inquiries on mobile digital platforms and for cash transfers between money wallets and bank accounts.
Central Bank of Kenya issued guidelines that compel lenders to re-negotiate loan repayment terms with borrowers, including payment holidays, penalty waivers.
The Kenyan banking sector’s gross non-performing loans (NPLs) increased 11 per cent to Ksh4.03 trillion ($40.3 billion) last year from Ksh3.63 trillion ($36.3 billion) in 2018, a situation that is set to worsen going by the huge economic impact on struggling borrowers.
Lenders in Kenya are warning that a raft of measures adopted to cushion Kenyan borrowers from the effects of the coronavirus pandemic could push them into a loans crisis.
The Central Bank of Kenya (CBK) issued guidelines that compel lenders to re-negotiate loan repayment terms with borrowers, including payment holidays and penalty waivers.
In addition, Kenyan banks are to meet all costs related to the extension and restructuring of loans, waive all charges for balance inquiries on mobile digital platforms and all charges for cash transfers between mobile money wallets and bank accounts.
The banks now warn of a possible financial crisis due to the anticipated revenue loss from these measures.
“We’re in a health crisis but we need to be careful so that we do not enter into a banking crisis that would weigh more on the prospects for an economic rebound,” said Habil Olaka, chief executive of the Kenya Bankers Association (KBA).
Commercial banks were expected to submit reports on their compliance with the CBK guidelines by April 10, but the regulator did not respond to queries on the number of lenders that had complied by the time of going to press.
The Kenyan banking sector’s gross non-performing loans (NPLs) increased 11 per cent to Ksh4.03 trillion ($40.3 billion) last year from Ksh3.63 trillion ($36.3 billion) in 2018, a situation that is set to worsen going by the huge economic impact on struggling borrowers.
The lenders argue that a blanket relief for borrowers will be a recipe for industry-wide disaster.
“The options of relief available have to be on a one-on-one discussion with banks since there is uniqueness in the business challenges and needs,” said Mr Olaka.The Covid-19 pandemic has had a devastating impact on the global economy.Governments are […]