Pain for borrowers as loan repayment holiday ends

The holiday of debt repayment that borrowers have been enjoying for the last six months will end today.

And as Kenyans prepare to pay for other expenses such as school fees, with normalcy beginning to show in the economy, most borrowers will also be required to start servicing their loans as they did before Covid-19 struck.

This is after Central Bank of Kenya (CBK) Governor Patrick Njoroge said the emergency measures that banks have been implementing, including rescheduling the repayment dates for borrowers distressed by the pandemic, will come to an end beginning today.

“The point here is to just emphasise that, yes, we are going back to the normal operations the way things used to happen and that is where we will become October 1,” said Njoroge yesterday in a press briefing in Nairobi.

The briefing came after the Monetary Policy Committee (MPC), the apex bank's highest decision-making organ, met and decided to maintain their benchmark lending rate at 7 per cent for the fifth consecutive meetings.

After the virus struck, most borrowers were given an extension of between six months and one year in a deal struck with the regulator to help them weather the Covid-19 storm - in terms of offering them some breathing space in loan repayment.

“So from October 1, the banks will begin to look at the borrowers and assessing how they are doing in terms of their payments against their loans,” said Njoroge.

He said this would be a process that would see borrowers who had benefited from the standstill given 60 days to repay, and another 30 days to regularise. “So you have three months to regularise your loans,” said Njoroge.

Loans worth Sh1.12 trillion were restructured, with borrowers distressed by Covid-19 pandemic asking their banks to change the terms of their credit facilities.

Njoroge noted that the restructuring done by banks was not 'free lunch', adding that lenders had to register less profit as banks provisioned for possible defaults.

Shareholder return also dipped during this period.

The loan restructured represents about 38 per cent of the total banking sector loan book of Sh2.9 trillion by end of August. “Of this, personal or household loans amounting to Sh271 billion (33 per cent of the gross loans to this sector) have had their repayment period extended,” said the CBK boss in a post-MPC statement.

Trade sector was the largest beneficiary of the restructuring for the other sectors, comprising 20.7 per cent of the Sh849.9 billion loans had their terms changed.

Loans restructured for the manufacturing sector were valued at 20.2 per cent, real estate (18.3 per cent) and agriculture (11.1 per cent). CBK is optimistic that the economy has started recovering. MPC expects the economy to grow by of 3.1 per cent this year.