Loans amounting to Sh1.38 trillion have been restructured by banks in the country in the last eight months as businesses and households sought relief over the Covid-19 pandemic.
This comes amid a 13.6 per cent rate on the ratio of gross Non-Performing Loans (NPLs) to gross loans in October and August.
Central Bank of Kenya(CBK) data shows of the restructured loans, which is 46.5 per cent of the total banking sector loan book of Sh2.97 trillion, about Sh303.1 billion were personal and household loans.
This is 36.1 per cent of the gross loans to this sector, where borrowers have had their repayment period extended.
The different sectors of the economy however accounted for the lion share of restructured loans totaling Sh1.076 trillion, as of last month.
The manufacturing sector accounted for the biggest share ( 22.7 per cent) of restructured credit facilities which are about Sh244.5 billion, as industries faced reduced business with some forced to either close down down or scale down production.
A survey by the Kenya Private Sector Alliance(Kepsa) conducted between September and October indicates 88 per cent of surveyed entities in manufacturing reported they had lost customers, while 63 per cent faced market access challenges.
The trade had Sh201.4 billion or 18.7 per cent of loans restructured, real estate (14.5 per cent or Sh156.2 billion), while the agriculture sector had Sh137.8 billion restructured, which is 12.8 per cent of total restructured loans to the different sectors.
NPL increases were noted in the transport and communication, energy and water, tourism, restaurant and hotels and real estate sectors, mainly due to the disruption of businesses, CBK governor Patrick Njoroge said in a post-Monetary Policy Committee (MPC) briefing on Friday.
“The increases in NPLs were partially offset by repayments and recoveries in the trade, manufacturing and building and construction sectors,” Njoroge said.
During the first two quarters of the year (between January and June), real Gross Domestic Product(GDP) is estimated to have contracted by 0.4 percent, reflecting the adverse impact of the Covid-19 pandemic in the second quarter on the services sector, particularly education, transport and storage, and accommodation and restaurant services.
“The contraction was partly offset by strong growth recorded in agriculture, health, ICT, and the financial and insurance sectors,” the governor said, even as he affirmed that the banking sector remains stable and resilient, with strong liquidity and capital adequacy ratios.
After Covid hit the country in March, CBK, on March 18, announced a number of measures to provide relief to borrowers, among them restructuring of loans.
The apex bank also reduced the Cash Reserve Ratio (CRR) to 4.25 per cent from 5.25 per cent, releasing Sh35.2 billion as additional liquidity availed to banks to directly support borrowers that are distressed as a result of the pandemic.
It also lowered the base lending rate to 7.25 per cent from 8.25 per cent, which was further brought down to seven per cent (7%) in April, a rate that it has maintained to date.
Of the total amount that was released by the lowering of the CRR) Sh32.6 billion (92.7 per cent) has been used to support lending, especially to the tourism, trade, transport, communication, real estate, manufacturing and agriculture sectors, the governor noted.
“These measures have continued to provide the intended relief to borrowers,” the governor said.
Growth in private sector credit stood at 7.7 per cent in the 12 months to October, supported by a recovery in demand with the improved economic activity following the easing of Covid-19 containment measures, and accommodative monetary policy.
The maturity of new loans issued since August has continued to lengthen.
Strong growth in lending was observed in manufacturing (7.8 per cent), transport and communications (21.1 per cent), real estate (7.6 per cent) and consumer durables (15.7 per cent).
Meanwhile, CBK has noted resilience in the second half of the year, which continues to be supported by agriculture, a recovery in manufacturing, exports, and services following the easing of Covid-19 restrictions.