It's Wairimu
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The Central Bank of Kenya (CBK) on Wednesday, April 14, released data on credit defaults which shows that thousands of home owners defaulted on mortgage loan repayments, and therefore risk losing their homes among other properties.
The data by CBK showed that 14.5 per cent of all loans taken have been defaulted.
The new figure represents a sharp increase of all defaulted loans which stood at Ksh 349.94 billion at the end of February 2020, but hit Ksh 432.45 billion in the same period in 2021.
As a result of the default, the lenders watchdog noted that banks were aggressively looking into auctioning properties of their borrowers to recover the loans.
The lenders had been prevented from auctioning properties in 2020 due to the effects of Covid-19 pandemic that led to collapse of businesses and job cuts.
CBK, in its report, indicated that the most affected sector was real estate with other properties accruing from agriculture and manufacturing sectors.
“The increases in Non-Performing Loans (NPL) were attributable to the subdued business environment, and banks continue to make provisions for the NPLs,” stated CBK Governor Patrick Njoroge according to Business Daily.
The lenders watchdog also confirmed a spike in the number of defaulters that had been blacklisted with the Credit Reference Bureaus (CRBs) since the service resumed in January 2021.
On October 1, 2020, CBK lifted the six-month freeze for listing defaulters who were cushioned during the Covid-19 pandemic.
Commercial banks issued a notice to CBK announcing their plan to intensify property auctions.
“For the quarter ending April 30th, 2021, banks expect to intensify their credit recovery efforts in all economic sectors. The intensified recovery efforts are aimed at improving the overall quality of the asset portfolio,” he added.
In the Daily Nation newspaper, Monday, April edition, property auction notices filled nine pages signaling tough times ahead.
The properties listed included mansions, high-rise apartments, motor vehicles and household items in Nairobi and across other parts of the country.
Ever since, auction notices have continued filling a good percentage of newspaper ad sections.
Economist Sam Okumu warned that the economic situation in Kenya was poised to worsen in the coming months.
He further noted that there was a spike in the auction of people's properties because businesses were not realising as much profit as they used to before, thereby causing businesses and entrepreneurs to default on existing loans.
"The auction notices cast a lot of doubt on our financial markets. The demand and supply for money is always dictated by the value of the interest rates. We have other external factors like government policies.
"The worst is yet to come. Last year the government assumed that the tax reprieve would work, but businesses are still suffering. Right now, restrictions have come back without the tax reprieves. What do you expect this year, it means it will be worse," warned Okumu.