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 scampering to put together stimulus packages to cushion their economies against the effects of Covid-19 and prepare for the expected recession.The virus has so far infected more than 2.7 million people and killed over 190,000 globally.In China, the origin of the pandemic, the banking regulator, China Banking and Insurance Regulatory Commission (CBIRC), has drafted guidelines that will see banks’ lending to small and medium enterprises included in its annual assessment of the industry.This is to help the Chinese government monitor how much support banks are extending to struggling small firms.Absa Bank Kenya Plc announced that it has restructured customer loans amounting to over Ksh8.3 billion ($83 million) as part of a bigger relief programme to cushion […]