Connect with us

Business

Banks lose 1.3m loan accounts in 2 years

Published

on

Loading...

[ad_1]

News

CBK Governor Patrick Njoroge
CBK Governor Patrick Njoroge. FILE PHOTO | NMG 

The number of bank loan accounts dropped by 1.35 million to 7.15 million in the past couple of years, reflecting the slowdown in disbursement of loans in the wake of the September 2016 capping of interest rates, latest industry data shows.

Data from the Central Bank of Kenya (CBK) shows that banks lost 657,000 loan accounts last year, adding to the 695,000 loan accounts lost in 2016. The value of gross loans disbursed followed a similar trend having dipped by Sh114 billion to Sh2.15 trillion last year.

This means that thousands of prospective borrowers were unable to access fresh loans from banks even as thousands of maturing loans were paid without successful applications for new ones.

It was also clear that only 15.37 per cent of the total 46.55 million bank accounts at end of 2017 had taken loans. This is down from 18.9 per cent the previous year and the peak of 24.6 per cent in 2015.

The 2017 drop ended the pattern of consistent growth in loan accounts that had persisted since 2010 when the Central Bank of Kenya (CBK) started publishing the information.

Kenya Bankers Association (KBA) chief executive Habil Olaka said the data was the clearest confirmation that the rate cap has made loans cheaper, but not available to customers. He expects the trend to continue.

“This compounds the fact that going forward, availability is becoming scarce. If loans are maturing but not being rolled over or renewed, then the number of loan accounts will continue to fall over time,” he said.

“For the ones that were already issued and had to be adjusted to the rate cap price, the drop in numbers means that riskier customers can’t get fresh loans on this rate because they don’t qualify.”

The decline in the number of bank accounts was even as customers opened 5.42 million new accounts and deposited an additional Sh300 billion, pushing the sector’s total deposits to Sh2.9 trillion.

Mr Olaka said this was partly due to customers seeking higher returns on deposits as provided for in the rate cap laws.

Loading...

Many banks directed fresh deposits to government securities instead of the private sector, arguing that the caps had denied them a chance to lend to individuals whose risk profile was deemed to be higher than what the law could accommodate.

During the year, personal or household loan accounts, which account for over 85 per cent of loan accounts, dropped by 519,000 adding to the previous year’s to hit 1.14 million.

Households and personal account borrowing dropped by Sh42.43 billion last year from Sh584.55 billion in 2016, according to the data.

The agriculture sector, which many banks see as carrying the highest risk profile due to its dependence on erratic weather and poor book keeping, lost half of its 180,533 accounts in 2015 to 91,140.

The sector, which is the biggest contributor to GDP, recorded the first negative growth of 1.1 per cent since 2009, according to the Kenya National Bureau of Statistics data.

“Government needs to increase investment in terms of infrastructure to create enabling environment. This will de-risk the sector and lower the risk perception,” Mr Olaka said.

The list of sectors that posted a drop in loan accounts included trade (130,000) and real estate (2,700). Mining and quarrying, financial services, tourism, restaurant, hotels, building and construction also suffered similar fate.

Top banks such as KCB #ticker:KCB , Equity #ticker:EQTY , Co-operative Bank #ticker:COOP , Standard Chartered Bank #ticker:SCBK and Barclays #ticker:BBK booked declines in loan accounts – confirming Equity CEO James Mwangi’s statement in March that he was forced to be “really brutal a little bit” and deny riskier customers loans.

“We had to do real market play. So essentially we could only lend to those whose risk could be accommodated within our risk pricing. We didn’t want to pretend to be good,” he told investors in a teleconference call.

Gross non-performing loans (NPLs) rose 23.4 per cent to Sh264.6 billion, pushing the ratio of gross NPLs to gross loans to 12.3 per cent, up from 9.3 per cent.

This was mainly due to delayed payments from public and private entities, uncertainties due to elections and poor weather conditions, according to CBK.

Customers have been increasingly losing their commercial vehicles to the auctioneers’ hammer. KCB CEO Joshua Oigara said in January that the bank had auctioned more than 250 vehicles due to loan defaults, mostly due to delay in government payment to SMES.

“We are selling vehicles and I am sure the owners did nothing wrong. Most of them have not been paid for almost two years,” said Mr Oigara in January.

[ad_2]

Source link

Loading...
Continue Reading

Business

World Bank pushes G-20 to extend debt relief to 2021

Published

on

Loading...

World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.

“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.

He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.

The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.

Loading...

People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.

For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.

Debt burdens, already unsustainable for many countries, are rising to crisis levels.

“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

Loading...
Continue Reading

Business

Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

Published

on

Loading...

The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.

“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”

According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.

Loading...

Tighter Reins on Platforms for Mobile Loans

The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.

Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.

Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

Loading...
Continue Reading

Business

Scope Markets Kenya customers to have instant access to global financial markets

Published

on

Loading...

NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options. 

This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.

The Scope Markets app offers clients over 500 investment opportunities across global financial markets.

The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.

The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).

The platform also offers an enhanced client interface including catering for those who trade at night.

Loading...

The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour;  Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).

The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.

Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”

He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.

Advertisement. Scroll to continue reading.

Loading...
Continue Reading

Trending