Demand for loans to swell by December

Consumer demand for credit is likely to soar in the coming weeks leading to December festivities according to stakeholders in the  banking sector.

Lenders believe that closer to the end of year which is synoninous with festivites, more Kenyans will borrow money, some of whom may have limited security.

“It is a trend you can trace from the last few months since the pandemic hit, it will continue to the last day of the year and beyond,” says the chief executive of Gulf African Bank, Abdalla Abdulkhalik.

Moratorium

Stress in the financial sector has surged since the coronavirus pandemic hit Kenya’s shores in March.

However, 70 per cent of borrowers sought moratorium on loan repayments as their incomes dipped and savings eroded.

The increased uptake of loans followed a period layoffs where more than two million employees lost jobs on the back of sluggish earnings in the wake of Covid-19 economic shocks.

With most of these Kenyans still out of work, and with several others operating on pay-cuts and reduced earnings, demand for loans will spike in the next two months amid full reopening of schools early 2021.

As a result, Mr Abdalla says local banks and other micro financial institutions will find themselves offering extended capital relief to struggling businesses, and those hit by the coronavirus pandemic for a protracted period.

“From a small one-third seeking moratorium when the CBK gave the directive in April, we now see almost two-thirds seeking it.

It clearly shows depletion of household savings in the last 6 months despite the reopening of the economy,” says Kamau Macharia, a former banker and financial expert.

The number of borrowers seeking moratorium is growing daily, according to the Chief executive of Jijenge Credit Peter Macharia, who says most of these borrowers now want to hold back whatever liquidity they have. 

Meanwhile, those borrowers at the bottom of the pyramid are also in search of a fresh dose of loans to resume their businesses.