For the first time in 12 months, the overall quality of loans in the banking sector has deteriorated.
According to the latest data from the Central Bank of Kenya, the NPL loss rate now stands at 14.0%.
Delinquent loans in the banking sector soared by 40 billion shillings in the two months to February, based on 16 accounts.
The CBK said a large portion of the 40 billion shillings loans went to the 16 accounts whose identities and ownership were not disclosed.
“It relates to about 40 billion shillings in terms of loans which led to this increase in this ratio and relates to something like 16 accounts. The point to make is that it’s not systemic across different sectors,said CBK Governor Patrick Njoroge on Wednesday.
He was speaking at a press conference following a meeting of the monetary policy committee held the day before.
“A few of these loans were in the manufacturing sector, which continued to perform very well, but for specific institutions that were having problems…these loans have now been classified as NPL,“added Njoroge.
He explained that the 40 billion shillings of non-performing loans came from large borrowers in the sectors that have seen the slowest growth in terms of recovering from the effects of the Covid-19 pandemic.
For example, major players in the manufacturing and real estate sectors take out huge debt to facilitate their operations and growth.
In the case of the 16 loans, each borrower would have had an average exposure of 2.5 billion shillings.
“Increases in bad debts were seen in manufacturing, tourism, restaurants and hotels, building and construction, and real estate.
“These increases were attributable to specific challenges in the respective businesses, and banks continued to build provisions for NPLs,said Njoroge in a press release.
Speaking on the weakening of the shilling against the dollar, he assured that the foreign exchange reserves of the CBK, which currently stand at 7 billion dollars or 800 billion shillings, which represents 4.80 months of import hedging, continue to provide adequate hedging and a buffer against any short term shocks in the foreign exchange market.