FINANCE

Micro-lender Jijenge sees collection rates inch back to pre-Covid levels

The repayment rates or collection rates have returned to between 80 and 85 per cent between July and September

In Summary

•Commercial banks restructured over Sh1.12 trillion worth of loans since April according to data from the Central Bank of Kenya.

•Out of this, personal or household loans amounting to Sh 271 billion or 33 per cent of gross loans in this sector, have had their repayment period extended.

Jijenge Credit CEO Peter Macharia/COURTESY
Jijenge Credit CEO Peter Macharia/COURTESY

Kenya’s microfinance industry is slowly limping back to normal operations after taking a severe hit during the Covid-19 lockdown, financial experts have noted.

Owing to the onslaught that led to a nationwide lockdown in March, collection rates had fallen to a trickle as microfinance institutions (MFIs) collect money from borrowers mostly in cash.

The risk of infections and measures postulated by the government then made the collection process nearly impossible according to the Chief executive of Jijenge Credit  Peter Macharia, who says the situation has tremendously improved since July when a host of restrictions were lifted.

The repayment rates or collection rates, he says have returned to between 80 and 85 per cent (July to September) compared with 90 to 95 per cent in pre-Covid era when the rates were higher in a period that also saw an uptick in disbursement rates in the micro-lending space.

“We have seen a huge revision in the last four months since the lifting on travel restrictions with over 80 per cent of collection or repayment rates of amounts we lend to our customers. This is better than what we had previously grasped in the three months preceding July when we began giving out moratorium,” Macharia said in an interview.

Microfinance, also called microcredit, is a type of banking service that allows people to take on reasonable small business loans safely, and in a manner that is consistent with ethical lending practices.

And like conventional lenders, microfinanciers charge interest on loans and institute specific repayment plans – which is sometimes prone to default that is particularly challenging because it pits the lender’s need for institutional survival against the difficult circumstances of the defaulting customer.

While there has been a loss of income in other counties due to Covid, Macharia said a lot of borrowers outside Nairobi have adjusted to the new normal by tweaking business strategies and cutting down liabilities in order to stay afloat.

“In the months of April, May and June we were forced to restructure over Sh100 million of our loan book because these businesses were struggling and needed a lift, but the situation has changed now, those borrowing are repaying in time,” he said.

Overall, Macharia who is also a veteran banker says the funding scenario has improved even though smaller companies are still struggling to get cheaper funds like the bigger ones.

Commercial banks restructured over Sh1.12 trillion worth of loans since April according to data from the Central Bank of Kenya (CBK).

Out of this, personal or household loans amounting to Sh 271 billion or 33 per cent of gross loans in this sector, have had their repayment period extended.