Kenya’s Manufacturing and Tourism Witnessed Surge in Loan Defaulters

The amount of problematic loans in the banking industry climbed marginally in the two months ending February, with defaults attributed to a few significant borrowers from a few industries.

This is a reverse of last year’s trend of declining non-performing loans, which encouraged most banks to lower their provision for bad debt, boosting their profits.

The Central Bank of Kenya reported in a press statement that “the ratio of gross non-performing loans (NPLs) to gross loans remained at 14 percent in February 2022, compared to 13.1 percent in December 2021.”

“The manufacturing, tourism, restaurant and hotel, building and construction, and real estate sectors also saw rises in NPLs. These increases were due to unique issues in the different sectors, and banks have continued to set aside funds for nonperforming loans.

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Because they often take out large credit facilities, which may go into billions of shillings per borrower, big consumers can drive up the entire stock of problematic loans.

The regulator mentioned the lenders that have witnessed a rise in defaults, but larger banks, with their vast balance sheets, dominate big-ticket lending.

“The manufacturing, tourism, restaurant and hotel, building and construction, and real estate sectors also saw rises in NPLs. These increases were due to unique issues in the different sectors, and banks have continued to set aside funds for nonperforming loans.

Because they often take out large credit facilities, which may go into billions of shillings per borrower, big consumers can drive up the entire stock of problematic loans.

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The regulator mentioned the lenders that have witnessed a rise in defaults, but larger banks, with their vast balance sheets, dominate big-ticket lending.

The real estate industry is also suffering from the pandemic’s loss of income among people and companies, with land and developed property owners taking longer to sell their holdings or facing reduced asking prices.


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