A drop in the number of tourists visiting Kenya has taken its toll on hoteliers’ ability to service bank loans, the central bank has reported. Further, according to a survey of commercial banks carried out by CBK, many more hospitality facilities are projected to default on loan repayments. “The current spate of insecurity in the country, travel advisories and heightened political activity may support the expected increase in NPLs (non-performing loans) in the tourism sector,” the banking regulator’s Credit Officer Survey for the first quarter of this year notes.
Among the respondents who provided feedback in the survey, 17 per cent informed CBK that demand for loans from the tourism sector had shrunk in the January to March quarter.
Further, the credit officers CBK talked to said they would be more cautious in approving loan applications from the tourism sector, and interestingly, construction. Unlike tourism that is exposed to external threats, lenders said they would be reluctant to give loans to contractors due to delayed payments from the Government for public sector works.
For the tourism sector, the slowing demand for credit has been attributed to travel advisories issued by a number of foreign governments, cautioning against travel to Kenya over heightened threats of terror attacks in the country.
The CBK survey uses information collected from credit officers in commercial banks to compile crucial sector-by-sector information on demand for credit and repayments. The findings on hoteliers’ sluggish demand for loans suggests a decline in new investments in the hospitality industry, which has been severely affected by the recent terror attacks that have hit the country.
Already, as many as 40 hotels at the Coast have closed down, and about 21,000 workers have lost their jobs following capacity cut-backs. Easing demand for credit from the sector is only one of the facets illustrating the dimming prospects of the country’s second-most important foreign currency earner, which also supported over half a million jobs.
