Kenyan banks restructured loans amounting to KSh1.63 trillion, equivalent to 54.2% of the total banking sector loan book by the end of December 2020 according to the Central Bank of Kenya. In March last year, the Central Bank introduced emergency measures in the banking system in order to offer relief to borrowers affected by the pandemic.
By the end of 2020, personal and household loans amounting to KSh 333 billion had their repayment period extended. Banks also restructured loans amounting to KSh 1.29 trillion issued to sectors like trade, manufacturing, agriculture, and real estate.
The percentage of gross non-performing loans to gross loans increased to 14.1% in December 2020 from 12% in December 2019. The percentage of gross non-performing loans to gross loans measures the health of the banking system and a high percentage shows that banks are struggling to recover issued loans and interest on the loans.
Banking Sector NPLs
The pandemic adversely affected businesses in Kenya and limited their ability to repay loans. According to the Central Bank, Kenyan banks registered an increase in non-performing loans in the transport and communication sector, agriculture sector, and the real estate sector in 2020.
Despite the sharp increase in non-performing loans in the past year, Kenya’s banking sector “remains stable and resilient, with strong liquidity and capital adequacy ratios,” says the Central Bank.
Benchmark Rate Retained at 7%
For the seventh meeting in a row, the central bank retained its key interest rate steady at 7% during its January 2021 meeting as widely expected. The Monetary policy committee noted that that the current monetary policy stance remains appropriate, as measures implemented since March were having the intended effect on the economy.