Latest Central Bank of Kenya data shows the NPLs ratio—a measure of the proportion of loans for which interest has not been paid for at least three months —rose to 14.8 per cent as at December, compared to 13.3 per cent over a similar period in 2022.
The Star has seen at least three messages from Absa Kenya, I&M and Cooperative banks, inviting members with active loans to local branches to restructure where necessary.
"Dear customer, we are committed to being your preferred partner even in a volatile financial environment. Do not hesitate to visit your credit manager at your branch to benefit from our loan restructuring options,'' one of the messages reads in part.
The Cooperative Bank on the other hand says it is restructuring customer loans to align their monthly repayment amounts with their reduced income levels while at the same time extending repayment periods.
“We are supporting our customers by way of restructures to align monthly repayment amount with their current income levels, extension of repayment period to accommodate for reduced monthly payments,” Co-operative Bank said in a statement.
The bank said it also offers customer training on debt management to assist them build prudent financial skills to reduce defaults.
I&M Group said it would sustain its waiver of the transaction fees on money transfers between mobile wallets and bank accounts throughout this year and open another window for the restructuring of customer loans.
This is not the first time lenders have resorted to such measures to help members cope with the biting economic times.
At the height of Covid-19 in March 2020, CBK announced measures that included allowing lenders and borrowers to negotiate moratoriums on loan repayments to mitigate the adverse economic effects of coronavirus.
The grace period that expired in March 2012 saw loans worth a cumulative Sh1.7 trillion restructured, accounting for 57 percent of the banking sector’s gross loan book.
A senior credit manager at NCBA Bank told the Star that unlike during Covid where more loans under the personal category were restructured, currently more businesses and manufacturers are queuing for loan restructuring.
"The foreign exchange crisis and high taxes pushed businesses to a corner as households turned to shylocks and other options like Saccos and borrowing from relatives to survive. The size to be restructured is likely to be higher than even during Covid,'' he said.
The official expressed concern that the trend will persist through June on account of increased rates after CBK hiked the base-lending rate by 50 basis points to 13 percent in the last review.
Lenders have since increased their rates to an average of 17.8 percent, with Equity announcing a rate of 18.24 percent on Tuesday.
Saccos are now taking advantage of the situation to woo borrowers burdened with high interest rates by banks.
"Dear member. Do you have a loan facility whose interest rate has been revised upwards because of a change in the Central Bank rate? We have you covered, talk to us," says a message from a leading Sacco.
Latest CBK disclosures show manufacturers have overtaken traders as the biggest defaulters, reflecting the rising operation costs for the sector, which has been hit hardest by elevated inflation as well as new and higher taxes.
The sector’s stock of NPLs jumped 59.2 percent to Sh133.7 billion in the year to September 2023 from Sh84 billion a year ago.
The Monetary Policy Committee note issued a fortnight ago shows that businesses have been borrowing to mostly meet tax obligations with credit growth observed in manufacturing (20.9 percent), transport and communication (20.8 percent), trade (13.1 percent), and consumer durables (9.9 percent).
"The number of loan applications and approvals remained resilient, reflecting sustained demand, particularly for working capital requirements," said CBK.
