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Kenyan banks are expected to spend Shs1 trillion (US$6,5 million) on loan default costs. High bank rates, increasing gasoline prices, and an upsurge in the cost of living are all predicted to lead to the prospective loan default.
Players in the country’s financial industry are concerned about the end-to-year profit loss, as reported by The Star Kenya, a Kenyan news publication.
What bankers are saying
“The cost of living is rising while disposable income is shrinking at an alarming rate. Borrowers are torn between buying food and repaying debts. The recent jumbo rate hike has just worsened the situation,” investment banker Pamela Simani told the Star.
The investment banker also noted that this complication could result in job cuts as employers struggle to scale their businesses. Another banker, James Njagah, stated that high lending rates will undoubtedly dissuade lenders from making as many loans as they did in recent years. He emphasizes that the government, which has higher sustainability prospects, is more likely to receive loans than the private sector, which is more susceptible to economic shocks.
The country’s central bank noted that the ratio of gross non-performing loans (NPLs) to gross loans was 15,3 percent in October 2023 compared to 15 percent 2 months prior. – Business Insider Africa
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