(Ecofin Agency) – During his presidential campaign, Kenyan President William Ruto promised to solve the credibility problem of millions of small customers. The central bank is already making progress on the project with a first solution in place.
In Kenya, the central bank has officially announced the launch of the restructuring program for loans granted by commercial banks to more than 4.2 million of their small customers through mobile phone platforms. “The institutions will give a discount of at least 50% on loans […] non-performing in progress at the end of October 2022 »says CBK in a statement.
The main objective of this operation is to change the solvency of borrowers from non-performing to performing and it should last until May 31, 2023. The total value of the debt to be restructured is estimated at 30 billion shillings ($246 million). This is just under 0.8 of the total outstanding portfolio of bank loans in the country, which per October 31 was at 3.2 trillion Kenyan shillings (US$26.5 billion).
The central bank thus hopes to restore access to the credit market for millions of small and medium-sized enterprises (SMEs), which have been variously affected by the Covid-19 pandemic due to the prolonged cessation of their activities. During his presidential campaign, William Ruto, the country’s current president, promised reforms to restructure the profile of borrowers in Kenya.
Until then, a performance qualified as insolvent can no longer borrow from banks. The reform proposal would like to preserve the possibility of applying for credit, while at the same time giving the unscrupulous borrower’s profile a low score. While validating this unusual measure, the central bank reminded borrowers of their obligation to repay their loans. According to a recent report published on the CBK website, financial inclusion in Kenya reached 83.7% by the end of October 2022