Central Bank of Kenya(CBK) has a made a move that will leave thousands of loan defaulters listed with credit reference bureaus (CRBs) from today.
Yesterday, CBK governor Patrick Njoroge gave the banks the green light to blacklist borrowers who have defaulted in the wake of the COVID-19 economic fallout.
Kenya has three CRBs — Metropol, TransUnion and Creditinfo International— they will today Blacklist thousands after the expiry of the 90-day grace period elapsed.
In March, CBK had announced the suspension of CRB listing for loans that were defaulted after April 1, and the relief was to last for six months to September 30.
This is coming at a time the Banking sector is struggling with mounting unpaid loans whose share has risen to the highest level since August 2007.
“The point here is to emphasise we are going back to the normal operations, the way things used to happen and that’s where we will be from October 1. And there is a process there they will indicate if let’s say you have not paid loans, you have 60 days, they will indicate that to you firmly… They will give you 30 days so you have three months to regularise whatever you had not paid.” Dr Njoroge said in reference to the listing moratorium deadline.
By January 2020, more than 3.2 million Kenyans were already been negatively listed as loan defaulters with the CRBs.
before the outbreak in an economy where job cuts and near-stagnant wages have left thousands of people in a debt trap.
Data from the CRBs shows that the accounts negatively listed has jumped from 2.7 million last year, most of them linked to mobile digital borrowers.
Workers and businesses defaulted on loans worth Sh30 billion in the four months to June when Kenya imposed stringent measures to contain the spread of the coronavirus.
The non-performing loans (NPLs) growth emerged in a period when Kenyans deferred payments on nearly a third of the banks’ total loans.
The ratio of NPLs rose from 12.7 per cent in February to 13.6 per cent in August— the highest since August 2007 when it stood at 14.41 per cent.
COVID-19 has crippled Industries and other businesses that have now been forced to cut down on their activities leading to job cuts and unpaid leave for retained staff as profitable firms move into losses.
Firms that had borrowed based on the forecast of cash flows have also been struggling to repay their bank loans.