Lender spares borrowers default penalties

NAIROBI, KENYA: Secured loans provider Mwananchi Credit has waived penalties on loan defaults to reduce repayment burden for borrowers. 

The company says the up to 100 per cent default penalty fee waiver is aimed at cushioning customers from the adverse financial effects of the Covid-19 pandemic, which has pushed many households and businesses into the red.

Most Kenyans have either lost their jobs or are contending with reduced incomes due to the economic slowdown caused by the outbreak of Coronavirus in Kenya. Most companies have scaled down their operations, while others have temporarily closed and fired employees.

A new survey by financial recovery firm Collect Pro has also revealed that half of the Kenyan households have struggled to keep up with their loan payments due to the negative effects of the Covid-19 pandemic on their livelihoods.

Dubbed the Indebtedness Survey, the study uncovered hard-hitting realities for individuals and institutions alike, which if not addressed will accelerate the downward spiral of the current credit crisis in the country.

Ten per cent of the surveyed households reported they are unable to service their loans at all, with another 13.6 per cent falling significantly behind in their payment obligations.

A quarter of the respondents (24.9 per cent) said they are slightly behind in their loan servicing obligations, with the survey also finding that a third (37.5 per cent) have already taken advantage of the moratorium on repayments to ease their repayment burden.

“With this in mind, we would like to announce up to 100 per cent penalty waiver for all our clients since the pandemic started in March this year,” Mwananchi Credit Director Dennis Mombo said in a statement.

Mombo asked customers facing challenges in servicing their loans to come out and have their situations addressed by credit officers.

"If you have experienced a drop in income or an outright job loss, the best thing to do is to reach out to us and let us know your circumstances,” he added. “We don’t charge penalties on defaulted payments. We are flexible when a customer is more proactive.”

Mwananchi Credit Ltd offers an array of credit solutions including LPO financing, salary advance loans, cheque discounting, logbook loans, weekend loans and other loans secured by title deeds, among others.

Mr Mombo advised borrowers to share their financial situations instead of waiting for the company to intervene. Through the waiver, the company is offering temporary relief to consumers on loan repayments through various programs.

He said Mwananchi Credit understands that these are challenging and uncertain times and giving guidance to individual customers and small businesses experiencing cash flow problems.

“We are working directly with customers on a case-by-case basis to address their needs, and we are currently providing fee waivers and payment deferrals,” he said.

In March, soon after the pandemic was announced, Mwananchi Credit introduced interest-free loans for new customers and rebates for existing borrowers to ease the burdens of credit on Kenyans who are suffering the effects of a partial quarantine imposed by the government to reduce the spread of the highly infectious virus.

Central Bank early this year suspended listing of loan defaulters in Credit Reference Bureau (CRB) systems in solidarity with borrowers during the hard economic times resulting from the effects of COVID-19.

Listing with CRBs, however, resumed in October. “ In terms of the measures that are ending, that I think is clear, so from October 1 the banks will begin accessing their borrowers, then you will have three months to regularize what you were not paying,” said Njoroge during a post MPC briefing.

“The point here is to just emphasize that we are going back to the normal operations,” he added.