A trader counting money after a day's sales. Defaults on mortgages and loans issued to the transport sector crossed the Ksh100 billion mark - a worrying indicator of tough economic times since the onset of the pandemic.
A trader counting money after a day's sales. Defaults on mortgages and loans issued to the transport sector crossed the Ksh100 billion mark - a worrying indicator of tough economic times since the onset of the pandemic. (Photo: Nation Media Group)

The transport and real estate sectors led loan defaults in Kenya over the nine months to December, new data from the Central Bank of Kenya (CBK).

Defaults on mortgages and loans advanced to the transport sector crossed Ksh100 billion on the back of business closures, job losses, wage cuts and travel restrictions introduced in response to the Covid-19 pandemic. Loans secured through title deeds and vehicle logbooks posted the fastest default growth rates over the period.

Credit companies have in recent times aggressively marketed loan products based on title deeds and logbooks, leading many Kenyans to take up debts.

The cumulative value of loans defaulted by the transport and real estate sectors rose 45.25 per cent between March and December to hit Ksh99.5 billion.

The two industries alone accounted for 46.27 per cent of Ksh67 billion in new bad loans between March and December last year.

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Defaults in the transport and property market spikes to Ksh128.1 billion in December from Sh92.5 billion – driven by defaults in construction which increased 4.6 percent to Ksh28.6 billion.

Loan defaults in the transport and communication sector rose by 81.43 per cent over the nine-month period to Ksh38.1billion.

Central Bank of Kenya (CBK) Governor Paul Njoroge. In 2020, commercial banks restructured loans totaling Ksh1.38 Trillion.
Central Bank of Kenya (CBK) Governor Paul Njoroge. In 2020, commercial banks restructured loans totaling Ksh1.38 Trillion.

Commercial lenders in 2020 restructured loans worth over Ksh1.12 trillion since April in a bid to cushion customers affected by the pandemic.

“While liquidity of the banking sector remains resilient, credit risk has been elevated with the ratio of non-performing loans rising to 13.6% during the August-October 2020 period. Banks have restructured their loans books due to liquidity pressures on the borrower. This has affected lenders’ profitability which is something we had expected,” Central Bank Governor Patrick Njoroge revealed at a Monetary Policy Committee (MPC) briefing).

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