Kenyans Default Loans Worth Ksh30 Billion During Pandemic

Kevin Namunwa | Aug 5, 2020

Workers and businesses defaulted on loans worth Ksh30 billion in the past four months, the sharpest four-month increase in recent history.

In the four months since Kenya recorded its first case of COVID-19. Government’s restriction to curb the spread of the virus resulted to a deteriorating economy hence the rise in defaulted loans.

Data from the Central Bank of Kenya shows that non-performing loans (NPL) rose to Ksh379.9 billion in June, up from Ksh 349.9 billion before the first case of the virus.

Kenyans deferred payments on nearly a third of the bankers’ total loans.

This is credit that remains unpaid for more than 90 days. The ratio of NPLs rose from 12.7 per cent in February to 13.1 per cent — the highest since August 2007 when it stood at 14.41 per cent.

The situation in the country was worsened by the coronavirus pandemic with Kenyans feeling the pinch of the plummeting economy. Industries and business have had to to cut down their activities in response to the pandemic.

This has led to job cuts and unpaid leave for retained staff as profitable firms moves into losses. Kenyans’ situation has not been good during the past four months with experts predicting a further dip in the near future.

This has seen workers who had tapped mortgages and unsecured loans for purchase of goods such as furniture and cars and expenses like school fees default. Unsecured loans are given on the strength of one’s salary.

The outbreak has battered the economy, with the Treasury projecting growth to slow down to 2.5 per cent this year from 5.4 per cent last year, due to the impact of the Covid-19 pandemic.

Several banks are preparing for borrowers who had applied for a three-month freeze on loan repayments to apply for further extension.

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