More Kenyan borrowers are in default, signaling impending massive seizure of collateral

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A copy of the statement, which was seen by Business Insider Africa, says in part:

“The ratio of gross non-performing loans (NPLs) to gross loans stood at 14.1% in April 2022, compared to 14.0% in February. The increases were attributable to specific challenges in the respective businesses, and the banks continued to build provisions for bad debts.”

Specifically, outstanding bad debt in Kenya stood at $4 billion (KSh473 billion) in the first quarter of 2022. Needless to point out, this is bad news for many banks in this East African countries, many of which may now have to back down. step up their loan recovery efforts through collateral seizures.

Investopedia defines non-performing loans as loans where borrowers have not repaid principal amounts and interest within a 90-day due date. This is bad for banks because when loans are classified as non-performing assets, it implies that they are no longer earning interest for banks.

In the meantime, Kenya’s apex bank said commercial banks in the country continued to build provisions for non-performing loans. Also, despite the increase in NPLs, the country’s banking sector continues to show signs of stability and resilience, “with strong liquidity and capital adequacy ratios”.

Recall that the monetary policy committee of the Central Bank of Kenya on Monday raised the interest rate to 7.50%, surprising analysts who expected members of the MPC to maintain the rate at 7%. The apex bank explained that the increase was aimed at reducing inflationary pressures in the country.

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