In April 2020, the seven largest banks in the country restructured loans amounting to Ksh176 billion as the Central Bank of Kenya (CBK) intervened to protect businesses from the devastating economic effects of the Novel Coronavirus Pandemic.
The banks; Kenya Commercial Bank (KCB), Equity Bank, NCBA Bank, Co-operative Bank, Absa Bank Kenya Plc, Standard Chartered Kenya and Diamond Trust Bank (DTB) received hordes of restructuring requests just as the virus started crippling the operations of Kenyan businesses.
Appearing before the COVID-19 Senate Ad Hoc Committee on Coronavirus on Thursday, CBK Governor Dr. Patrick Njoroge said that 6,430 personal loan accounts had requested an extension of tenor on loans worth Ksh9.85 billion by the end of March while 1,841 business accounts had requested a restructuring of loans worth Ksh81.55 billion.
The extension of tenure and restructuring of the two classes of loans represent 0.35% and 2.87% of the total loan book value respectively.
“Requests for extension of personal loans and restructuring of other sectors loans are expected to ramp up in the coming months if the pandemic continues to penetrate,” said Dr. Njoroge. ” In general, the banking sector has started to feel the adverse impact of COVID-19 as a result of a slowdown in most economic sectors,”
Most of the business loans restructured were in the Tourism (31 percent), Real Estate (17.2 percent), Building and Construction (17.0 percent), and Trade (12.4 percent) respectively.
Conversely, the personal loan accounts extended accounted for 1.2 percent of the total household sector gross loans worth Ksh811.9 billion as of March 2020.
The Governor also pointed out that the monetary policy regulator had allowed eleven commercial banks and one microfinance bank to access Ksh17.59 billion from their minimum capital requirement kitty to boost their operations when business was slowing down.
This accounted for 50 percent of the Ksh35.2 billion freed when CBK reduced its Cash Reserve Ratio (CRR) requirements by 1% from 5,25 to 4.25%.
“With 50 percent having been used in just one-month, depicts the increased demand for funding from the banking sector,” said Dr. Njoroge.
The economic sectors that benefited most from the Ksh17.6 billion drawn from the CRR kitty are Tourism (45.58 percent), Agriculture (16.7 percent), Real Estate (11.94 percent) and Trade (10.37 percent)
Dr Njoroge admitted Micro, Small and Medium Enterprises (MSMEs) have borne the biggest brunt during the virus period stating that the regulator is working with banks, the government and development partners to craft a plan to help MSMEs overcome the crisis.
Plans being mooted include; access to concessionary and affordable funds, credit guarantee scheme to facilitate ease access to commercial credit as well as re-skilling and retooling of MSMEs when the COVID-19 abates.