Kenyans defaulted bank loans worth Ksh73 billion in the 10 months to December 2020, data from the Central Bank of Kenya (CBK) has shown.
As of March 2020, the total value of loans defaulted was Ksh351.73 billion, but the amount has increased to Ksh423 billion or 14.1 percent of the total Ksh3 trillion loan book.
The hike has been attributed to the effects of Covid-19 where at least 1.72 million workers lost jobs in three months to June when Kenya imposed a lockdown.
Currently, the ratio of non-performing loans (NPLs) has risen to 14.1 percent, the highest since August 2007 when it stood at 14.41 percent.
“Credit risk remains elevated and that is expected given where the economy is. We have done some analyses and assuming that the economy remains flat and the benefits of reopening the economy do not come through, NPLs will rise to 16 or 17 percent of gross loans,” said CBK governor Dr Patrick Njoroge.
“Those numbers are still manageable because banks have been doing what they needed to. They needed to be conservative and make provisions for their loans.”
Following the defaults, several banks including Standard Chartered Bank Kenya, Absa Kenya, Cooperative Bank of Kenya, DTB, I&M Holdings and NCBA have issued a profit warning.
Banks have already restructured loans worth Ksh1.63 trillion by end of December, an equivalent of 54.2 percent of the total loan book.
Banks now know their customers and understand their business models a lot more instead of having some sort of generic cookie-cutter approach and therefore can price loans to each customer,” said Dr Njoroge.
Personal and household loans top the list of debt restructured at Ksh333 billion.