Kenya has exceeded borrowing limits from commercial lenders in the country, according to the Parliamentary Budget Office (PBO).
Details obtained from the PBO’s half-year economic and fiscal update compiled in August from January 1 to June 30 shows that the net domestic borrowing by the government amounted to 367.4 billion Shillings instead of a targeted 233.4billion Shillings.
Another negative reality here, is that it reduced the liquidity available for the deposit money banks to lend to small and medium scale entrepreneurs across Kenya.
A small group of people in Kenya may benefit from this though, despite having lesser business transactions. These possible beneficiaries are bank shareholders whose dividend payments are due.
The Central Bank of Kenya is already considering approving the dividend payments irrespective of the amount- considering that far less volume of businesses had been conducted since the coronavirus pandemic reduced the volume of businesses possible in Kenya and around the world.
Most banks will be in the negatives since many customers are not able to repay their loans.
The banks will submit their respective internal capital adequacy assessments by the end of October, as stated in a CBK memo to the Kenyan lenders. This would show the extent of loss or profit each bank made during the period under review.
The internal capital adequacy assessments is a report that shows possible loans, the amount of loan given, number and frequency of repayments and total balance sheet for each lender.
In other words, it could be defined as a process to identify, measure, aggregate and monitor material risk. To ultimately build a risk profile that becomes the basis for allocating capital.
The Kenyan Apex bank would use the report to decide on the dividend approval considering the reality that the pandemic is still without despite the gradual opening of businesses in Kenya and elsewhere.
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