Kenyan banks strengthen loan repayment monitoring

Aug 18, 2015

Banks fear a jump in non performing loans as interest rates rise.

Commercial banks in Kenya are placing personal loan accounts under closer scrutiny to detect early signs of defaults, the country's Central Bank (CBK) said in its new quarterly Credit Officer Survey.

The document states that banks have significantly grown their retail loan book portfolio in the past years and need to have a closer look at repayment behaviour in a changing economic environment.

It said that while bad loans were previously spurred by challenges in the business environment, the prevailing concerns are now fuelled by a new wave of higher interest rates.

"Banks indicated that they intend to intensify credit recovery efforts so as to mitigate the likely increase in non-performing loans (NPLs) due to increase in interest rates and to improve their overall quality of asset portfolio," the regulator said.

Meanwhile, some lenders said that the depreciating shilling could force companies to reduce their imports, which may impact their profit negatively and lead to a rise in NPLs.

Bad loans rose 9.4 per cent to Sh117.2 billion (around €1 billion) in March from Sh107.1 billion in December, according to figures from the bank.ADNFCR-2976-ID-801797871-ADNFCR