Covid19 has rendered households with less disposable income due to loss of jobs, salary cuts, and unpaid leave. This has led to financial distress with many unable to meet mortgage obligations, rent, utility bills, and food. Last Friday marked the end of the second quarter #ceoCHAT sessions where we hosted Stanbic Bank MD, Mr. Charles Mudiwa. Mr. Mudiwa was expounding on financial strategies for households during the COVID19 pandemic. My Chat with a Bank CEO is a forum by Kenya Bankers Association where Bank CEOs engage social media users on topical issues.
Mr. Mudiwa commences by noting that two months since the first COVID19 case, it is time to change tune and think of how to proceed to the future. KNBS survey on Socio-Economic Impact of COVID-19 on Households revealed that 13.4% of Kenyans are out of work due to temporary layoffs or work reductions. The layoffs are one of the many adverse effects of the pandemic as Kenyans suffer through higher costs of commute and lack of finances, with 30.5% of households unable to pay their rent on time.
Measures household can take
Households can take several measures to mitigate against the effects of COVID19. Mr. Mudiwa recommends;
- Prepare a family budget
- Conserve as much cash as you can
- Minimize all unnecessary expenditure
- Ask your bank to reschedule all loans that you have
- Protect all your income sources
- Ensure you have retrenchment cover
- Invest in secure assets -Some of the secure assets one can consider include: Government paper, savings in a strong financial institution, or you can consider gold.
Shopkeeper’s role in this crisis
According to Mudiwa, shopkeepers play an important intermediary role, keeping the food supply chain working. With many people working from home with limited availability of restaurants, home cooking is becoming the norm. As a result, households are demanding more supplies from shops and it important that shops are well stocked to meet this demand. So shopkeepers need to ensure their shops are fully stocked and ensure that they maintain all the health safety measures.
Mudiwa further elaborates strategies for retirement planning in the pandemic. He says;
- Know your financial freedom number, which is the minimum amount of money you need to survive when you retire
- Build up savings that generate that financial freedom number
- Invest in stable assets
- Create a routine activity that will keep you busy
- Think of something that you can give back to the community, either as services or volunteering or skill
Mudiwa praises the Central Bank of Kenya for a robust framework to ensure financial stability during this period. Some of the regulations CBK has in place include; monitoring banks’ capital, liquidity (cash), non-performing loans, and management of the banks. He added that Stanbic has restructured Sh. 30 billion worth of loans for customers by giving them repayment holidays, interest rate moratoriums, modifications of their facilities, or a complete restructuring.