NAIROBI, Kenya, Apr 24-The restructuring of loans by Kenya’s banking sector is likely to affect flow of cash in the industry by an estimated amount of Sh10 billion.
In his submissions before the Senate Ad hoc Committee on COVID-19, Kenya Bankers Association Chief Executive Officer Habil Olaka said this will be as a result of an extension of loan repayment period by some lenders in support of their distressed customers facing the effects of the coronavirus.
“As banks provide this support there is an element of for gone liquidity which is estimated at a figure of about Sh10billion.
Olaka told the Committee that the loan holidays will further affect the credit portfolio with the non-performing loan group increasing by 2 percent.
“There is also the consequent effect that we will see a deterioration in the credit portfolio for the banks where the non-performing loan portfolio is estimated to increase by roughly 2 percent to hit 14 percent which will lead to provisioning going forward,” he added.
His sentiments come after Central Bank Of Kenya directed banks to extend personal loan repayment by one year.
This was part of measures adopted by the Government to support Kenyans from a looming economic crisis caused by the outbreak of the disease in the country.
According to analyst Reginald Kadzutu customers may fail to beat the new deadline set by banks which will further affect the banks balance sheet.
“The situation will hit their revenue, my worry is after the covid 19 period will the factors that made people not able to pay have changed, I believe they will last longer,” Kadzutu told Capital Business.
“ It will be a hit on their revenue, a big part of a bank’s balance sheet is their loan book which translates to the largest component of their revenue with interest income,” he added.
Already, banks such as Stanbic, Stanchart, ABSA among others have offered their customers a loan term break.
Some of the banks have further channeled their contributions towards fighting the virus through the COVID-19 Emergency Response fund.
The figure stands at about Sh413 million of what the banks have so far contributed to the fund we hope that we can reach a figure of a billion shillings.