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Kenya non-performing loans hit 13-year high due to COVID-19
The ratio of non-performing loans in Kenya have hit a 13-year high due to the shocks caused by the covid-19 pandemic. Central Bank data indicate that bad loans increased to 13.1 per cent, the highest since 2007 when they stood at 14.1 per cent. CNBC Africa spoke to Ken Gichinga, Chief Economist at Mentoria Economics for more.
Thu, 11 Jun 2020 04:17:23 GMT
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AI Generated Summary
- The surge in non-performing loans in Kenya, reaching a 13-year high of 13.1%, is the highest since 2007, underscoring the economic challenges brought on by the COVID-19 pandemic.
- Low liquidity and cash circulation in the economy are driving individuals and businesses to default on loans, hindering their ability to generate revenue and service debts effectively.
- Monetary policy interventions, such as revising benchmark interest rates and injecting liquidity into the system, are crucial to address liquidity issues and support businesses in navigating the economic fallout of the pandemic.
The economic impact of the COVID-19 pandemic has taken a toll on Kenya's banking sector, with non-performing loans reaching a 13-year high of 13.1%. This surge, as reported by Central Bank data, is the highest since 2007 when the ratio stood at 14.1%. To gain insights into this concerning trend, CNBC Africa spoke with Ken Gichinga, Chief Economist at Mentoria Economics. Gichinga highlighted the critical issue of liquidity within the economy, pointing out that low cash circulation is driving individuals and businesses to default on loans. The lack of liquidity is hindering businesses' ability to generate revenue and effectively service their debts. In response to these challenges, Gichinga emphasized the need for monetary policy interventions to inject liquidity into the system and stimulate cash flow. He proposed the revision of benchmark interest rates as a more sustainable solution, advocating for a more effective tool to address liquidity issues in the long term.
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