Non performing loans projected to ease to pre-pandemic levels

NAIROBI, Kenya Feb 7-Global credit agency, Moodys, has projected Kenya’s bad loans to fall over the next 12 to 18 months and resume to pre-pandemic levels as the economy recovers from Covid-19 effects.

The agency, however, noted that they will still remain at a high of 12 per cent of banks’ total lending, from 13.1 per cent as of December 2021.

“This is down from a peak of 14.6 per cent in March 2021 and closer to the 12.0% reported at year-end 2019,” said Moodys.

During the pandemic, Kenyan banks extended the terms of their loans to help borrowers weather the crisis.

The lenders restructured loans amounted to 16 per cent of total loans as of August 2021.

This saw bad loans rise for the better part of 2020 and 2021` as most Kenyans struggled from the economic effects of Covid-19 leading to loan defaults.

This has started to improve as the economy recovered from the effects of the Covid-19 pandemic.

According to the latest data from the Central Bank of Kenya(CBK), the rate of non-performing loans fell to a 19-month low of 13.1 per cent in December on increased repayments and recoveries amid the easing of coronavirus economic hardships.

The figure is the lowest since May 2020 when it stood at 13 per cent.

In a recent credit survey by CBK,  majority of banks (41 per cent) expected loan defaults to fall in the quarter ending December 2021.

Further, Moodys also expects the banks’ loan-loss provisioning coverage of NPLs to remain strong at close to 70 per cent this year, up from around 60 per cent pre-pandemic.