Top banks restructure Ksh.176 billion customer loans in cushion against Covid-19

Seven of Kenya’s largest banks have restructured a combined Ksh.176 billion worth of customer loans to cushion clients against the Covid-19 pandemic, new data from the Central Bank of Kenya (CBK) shows.

The restructure which relates to the extensions on loan repayment are part of the domestic financial sector response to shield customers from the economic shocks brought about by the global pandemic.

On March 18, the CBK announced emergency measures to mitigate against the adverse economic effects on bank borrowers including a one year extension on payments.

According to the reserve bank disclosures presented to the Senate Ad-hoc Committee on the Covid-19 situation on Thursday, part of the restructured loans include Ksh.9.9 billion relating to 6430 personal/households accounts which received an extension of tenor.

Further, Ksh.81.6 billion relate to restructures on key sectors including tourism, real estate, trade, building and construction.

The CBK expects loan restructure requests to spike in coming months as the economy takes a full blow from the pandemic.

“In general, the banking sector has started to feel the adverse impact of Covid-19 as a result of slowdown in most economic sectors. Requests for extension of personal loans and restructuring of other sectors loans are expected to ramp up in coming months if the pandemic continues to penetrate,” the reserve bank noted.

Two of the top seven including Standard Chartered and Absa have already disclosed restructures totalling to Ksh.16.3 billion to mirror the step up by banks in cushioning borrowers.

Earlier this month, Standard Chartered announced the restructure of loans worth Ksh.8 billion while Absa reported the restructure of loans totalling Ksh.8.3 billion between April 1 and April 14.

Data from the 2018 Banking Sector Annual report puts the combined market share of the seven banks at 63.1 percent with a marching 6.8 million loan accounts.

CBK has continued to play its monetary policy setting role to encourage greater liquidity including the recent slash on both the benchmark lending rate to seven percent and the commercial bank cash reserve ratio (CRR) to 4.25 percent.

Commercial banks have since utilized 50 percent of funds out of a total Ksh.35.2 billion freed by the CRR reduction as Covid-19 support loans to customers.

Last month, the reserve bank advanced plans to create a Ksh.100 billion SME credit guarantee scheme to support further lending to businesses by covering bank risks.

CBK Governor Patrick Njoroge has however insisted that relief to borrowers will be based on a one on one engagement between Kenyans and their respective banks.

“Some of the borrowers were somehow waiting for a blanket statement, it won’t work like that. You have to present yourself to your bank and then have that discussion explaining how you have been affected by the pandemic and then work out a relation or outcome which both yourself and the bank are satisfied with,” Dr. Njoroge said on April 30.