Banks Have Restructured Ksh 1.12 Trillion Worth of Loans During the Pandemic

Kevin Namunwa | Sep 29, 2020

Commercial banks have restructured over KSh 1.12 trillion worth of loans since March according to data from the Central Bank of Kenya (CBK).

Out of this, personal/household loans amounting to KSh 271 Billion or 33% of gross loans in this sector, have had their repayment period extended.

Other sectors had a total of Ksh 849.9 Billion in loans restructured- trade (20.7%), Manufacturing (20.2%), Real Estate (18.3%) and Agriculture (11.1%).

The Monetary Policy Committee(MPC), a top decision-making organ of the CBK said in a statement that as a result of its expansionary policy measures-which lowered the cash reserve ratio of banks; some KSh 35.2 Billion was released into the banking system.

Out of this, some KSh 32.4 Billion has been used to support lending activities, especially in the worst pandemic-hit sectors such as tourism, trade, transport and communication, real estate and manufacturing.

While the Kenya Shilling exchange rate has been on a steady decline since the pandemic erupted, CBK gave it a wide berth during the MPC meeting, insisting that there are adequate foreign exchange reserves to flatten the depreciation curve.

MPC observed that Q3 figures are already showing strong recovery from pandemic disruptions witnessed in Q2, 2020.

A survey by CBK, conducted between September 21st and 23rd reported recovery from COVID-19 disruptions that led to closures in April and May 2020.

Some 89% of those interviewed have re-opened compared to 35% in May.

These establishments also reported improved bed occupancy and employment levels since May 2020.

The MPC Private Sector Market Perception Survey, conducted this month, also reveals further improvement in optimism since July with greater expectation in the coming months as the economy reopens.

The Committee said that while there are signs of economic recovery, uncertainties regarding a possible second wave of coronavirus infections looms large.

The Committee said that while exports of tea, flowers and horticultural products have remained strong, receipts from services exports remain subdued as a result of weakness in international travel and transport.

Low international oil prices have offset low exports receipts with the current account deficit projected at about 5.1% of GDP in 2020.

The CBK has retained the policy rate at 7% amidst all signs of post-pandemic recovery. This is the 5th month that the CBR has been at this level.

The Bank’s top policy organ said the expansionary monetary policy stance adopted when Kenya reported its first COVID-19 infection was reported, is having intended effect on the economy.

While the MPC has scheduled its next meeting for November, it has given indications of its readiness to reconvene earlier, if necessary.

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