At least 6 banks in Kenya have not been given the green light by the Central Bank of Kenya (CBK) to increase borrowing rates, which would have otherwise made loans expensive for the majority of Kenyans struggling with the high cost of living.
A total of nine tier-one banks submitted requests to CBK to be allowed to increase borrowing rates based on risks to cushion their investments and to protect themselves against bad loans that have been ballooning with each passing financial year.
The six banks whose request seems to have been frozen by the regulator are:
- Co-operative Bank
- NCBA Bank
- KCB Group
- Diamond Trust Bank
- Standard Chartered
- I&M Bank
So far, the CBK has allowed 24 of Kenya’s 39 banks to increase their lending rates based on borrowers’ risk profiles, but a majority of the approved lenders are small banks like Victoria Commercial Bank, Paramount Bank, Credit Bank, and the Middle East Ban.
Currently, Equity Bank Kenya, Absa, and Stanbic Bank are the only tier-one banks to get the CBK nod, according to data from the Kenya Bankers Association (KBA)—the industry lobby, leaving the remaining six hanging and not knowing “what to do.”
The six banks account for almost half of the loans in Kenya.
As this unfolds, commercial banks are still holding 330.9 billion shillings worth of restructured loans on their books nearly two years since Covid-19 relief measures, which allowed for renegotiation of payment terms expired.
The Central Bank of Kenya (CBK) monetary policy report for December 2022 shows that by the end of last year, the outstanding amount of restructured loans accounted for nine percent of the sector’s loan book.
The regulator in March 2020 put in place emergency measures that included allowing lenders and borrowers to negotiate moratoriums on loan repayments to mitigate the adverse economic effects of coronavirus, with these measures expiring on March 31, 2021.