The volume of bad loans in Kenya exceeded 10 per cent of total loans issued by banks for the first time in 10 years, underlining the harsh economic environment that has engulfed the country, leaving households and businesses unable to meet their debt obligations.

Central Bank of Kenya reported the non-performing loans (NPLs) stood at 10.7 per cent of the industry loan book, which is at Ksh2.4 trillion ($240 billion), with the Governor Dr Patrick Njoroge citing default from large companies as a key contributor.

Companies in manufacturing, transport, financial services, retail and real estate have turned to staff restructuring to keep afloat. The job cuts have contributed to households defaulting on their loans.

“Even though the ratio has increased, it is quite localised and there are clear issues with those specific institutions and the lenders are working with them to deal with the NPLs,” said Dr Njoroge at a press conference last Tuesday.

He said that six companies in manufacturing, real estate and trade owed Ksh9 billion ($90 million).

Sugar companies Mumias and Nzoia are relying on government bailout to remain afloat after being bogged down by debt and cane shortages.

Plastic makers are expected to bear the brunt of a recent ban on plastic bags in the country with the government further refusing to allow them to produce for export purposes.

Other large companies struggling with debt include regional retailers Nakumatt and Uchumi, national carrier Kenya Airways and cement maker Athi River Mining.
Dr Njoroge attributed the defaults by large companies to delayed payments by the county and central government following a prolonged electioneering period that has brought government business to a near halt.

With depressed lending and lack of opportunities in a gloomy market banks have been left exposed. Credit grew by 1.6 per cent in August compared with a 1.3 per cent growth in July.