Kenyan banking industry to survive the pandemic – survey

The recent survey conducted by the Kenya Bankers Association (KBA) has shed light on the challenges faced by the banking sector in Kenya due to the ongoing pandemic. According to the survey, a staggering 94 percent of the banks in the country anticipate a significant slowdown in business growth. However, despite these concerns, the survey also revealed that a financial crisis in Kenya is unlikely, thanks to the high levels of liquidity within the banking system. Dr. Habil Olaka, Chief Executive of the Kenya Bankers Association, elaborated on the key findings of the survey in an interview with CNBC Africa. The survey highlighted that the COVID-19 pandemic is expected to have adverse effects on the banking industry, with a majority of members expressing concerns about the impact on their businesses. One of the key projections from the survey is that non-performing loans (NPLs) are likely to increase from the current rate of 12.4 percent to around 14 percent by the end of the year. Dr. Olaka attributed this expected rise in NPLs to the economic strain caused by the pandemic, leading to borrowers seeking accommodation from banks in the form of restructurings and adjustments to their monetary terms. Despite the anticipated increase in NPLs, Dr. Olaka reassured that the banking industry in Kenya remains sufficiently capitalized to withstand extreme stress. He emphasized that the high levels of liquidity and adequate capitalization in the sector provide a buffer against potential crises. With the clear signal from the central bank to support the banks during these challenging times, the resilience of the banking industry is expected to persist. Regarding support for small and medium enterprises (SMEs), Dr. Olaka acknowledged that while banks were gearing up to increase their support for SMEs before the pandemic, the current situation has altered their approach. The risk appetite of banks has shifted, leading to a more cautious extension of credit to SMEs. Although support for SMEs will continue, it will be done in a more controlled manner to mitigate risks. The survey findings reflect the sentiment within the Kenyan banking industry amidst the evolving economic landscape due to the pandemic. While challenges lie ahead, the sector's resilience, coupled with regulatory measures and support from the central bank, bodes well for its ability to weather the storm and emerge stronger in the post-pandemic era.