Kenyans have now defaulted on loans worth more than Sh. 600 billion, data from the Central Bank of Kenya has shown. This amount of loans in default is the highest in close to 20 years and has been attributed to high interest rates.
According to the data from the Central Bank, as at April 2024, the amount loans Kenyans had defaulted stood at Sh. 630 billion.
The gross-non-performing loans as a ratio of the total advanced loans increase from 15.5 per cent in February 2024 to 16.1 per cent in April 2024. The sectors where defaults were prominent included real estate, trade, agriculture, tourism, restaurants and hotels, building and construction, and households
Strikingly, the amount of defaulted loans has been rising steadily over the past few years. For example, towards the end of year 2020, Kenyans had defaulted on bank loans worth over Sh. 404 billion.
At that time, non performing loans (NPLs) increases were noted in the transport and communication, energy and water, tourism, restaurants and hotels and real estate sectors, mainly due to disruptions of the businesses. The increases in NPLs were partially offset by repayments and recoveries in the trade, manufacturing, building and construction sectors.
Data from the CBK showed that most of these defaults have been fueled by mobile digital borrowing and defaults.
By mid-2022, the amount of bank loans defaulted by Kenyans crossed the half a trillion shillings for the first time in history. The amount of defaulted loans jumped by Sh. 30.6 billion to hit Sh. 514.4 billion in the month of June 2022. According to the CBK, the increase in these defaults was due to a few large borrowers with specific challenges in their respective businesses.
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The current high amount of defaulted loans might persist, with local commercial banks having increased their lending rates to keep up with the Central Bank’s benchmark lending rate that is at 13 per cent currently.
For instance, KCB raised its lending rates on new and existing loans in the country towards the end of May 2024. The bank announced that it reviewed its Base Lending Rate for Kenya Shillings denominated facilities to a variable base rate of 15.6 per cent per annum effective 27th May 2024 for new facilities and 1st July 2024 for existing facilities.
Earlier in the first quarter of 2024, Equity Bank had announced that it would charge 26.74 per cent on new loans taken by risky borrowers. The bank also adjusted its reference rate from 17.56 per cent to 18.24 per cent.
In April this year, the NCBA Bank Kenya announced that Kenya Shillings Base Lending Rate would increase from 16.50 per cent per annum to 17.50 per annum, and the United States Dollars Base Lending Rate would increase from 11.0 per cent per annum to 11.75 per cent рer annum.