The Central Bank of Kenya(CBK), in the month of April alone, granted approvals to 11 commercial banks and one microfinance institution to access KSh 17.59 Billion in cash and deposits held in its reserves.
This follows a decision by the Monetary Policy Committee(MPC), a top policy organ of the CBK to lower the Cash Reserve Ratio(CRR) for commercial banks to 4.25% from 5.25%. The MPC made this decision after its meeting held on March 23rd, 2020, ostensibly to pump more cash into the banking system.
The KSh 17.6 Billion, which accounts for 50 percent of the KSh 35.2 billion, was used up in the month of April.
“With 50% having been used in just one-month, this depicts the increased demand for funding from the banking sector,” said Dr Patrick Njoroge, CBK Governor. He made these remarks today while making a presentation before the Senate Ad Hoc Committee on the COVID-19 situation.
Tourism accounted for the largest portion of funds provided by banks at 45.58 % followed by Agriculture 16.7%, Real Estate 11.94% and Trade 10.37%. Tourism, Restaurant and Hotels gobbled up KSh 8,018,521 in funding from banks, the leading consumer of credit from lenders and is considered the worst hit sector of the economy by COVID-19 global 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,” said Dr Njoroge, Central Bank of Kenya Governor
In the month of April alone, Kenya’s 7 largest banks had restructured loans amounting to KSh. 176 billion.
To cushion small business from effects of COVID-19, Dr Njoroge told the senate committee that it is working with banks, Government and development partners on access to affordable funds, facilitate easy access to commercial credit as well as re-skilling and retooling of medium and small-sized enterprises for when the COVID-19 abates.