CBK cushions borrowers from vagaries of scourge

By People Team
Thursday, March 19th, 2020
President Uhuru Kenyatta follows Central Bank of Kenya governor Patrick Njoroge (second left) as he outlines measures to cushion the economy from Covid-19 when the Governing Council of the Kenya Bankers Association paid a courtesy call on the President at State House, Nairobi, yesterday. Photo/PSCU
In summary
    • To cushion borrowers from effects of coronavirus , the Central Bank has asked banks to provide relief to customers who have taken up personal loans for a period of one year
    • This will apply to borrowers whose loan repayments were up to date as at March 2.
    • Borrowers are only required to visit their respective banks to renegotiate loan repayment terms.

Zachary Ochuodho and Seth Onyango

The Central Bank of Kenya (CBK) yesterday outlined a raft of measures to cushion medium-sized enterprises (SMEs) and mwananchi from the vagaries of the escalating Covid-19.

The move, which will ensure banks provide relief to borrowers on their personal loans, will offload adverse effects from most Kenyans as the country grinds to a possible lockdown on the back of the virus.

Speaking during a media briefing at State House, Nairobi, CBK governor Patrick Njoroge said this will apply to borrowers whose loan repayments were up to date as at March 2.

“We are anticipating a serious crisis due to coronavirus. We do not want this health crisis to become a financial crisis.

We know that the financial crisis is emerging, but we need to stop it before it happens. It is true we do not know the size of the economic impact of the coronavirus,” said Njoroge.

Already, consumer spending on non-essential goods and commodities has declined significantly as the fast-spreading coronavirus forces households to tighten their purse strings.

This even as the retail sector is slowly grinding to halt as the pandemic keeps people from stores, restaurants, movie theatres and workplaces. All people want is food.

On the flipside, expenditure on food items has increased exponentially as Kenyans with disposable income build min-silos in their homes in preparation of an economic lockdown.

Kenyans have been trooping to supermarkets to buy rice, pasta, sanitisers, sugar, detergents and toiletries in bulk to cushion themselves from ongoing disruptions in supply chain.

Njoroge warned yesterday that there could be job cuts as the virus takes toll on businesses.

“People may lose their jobs,” Njoroge warned, sounding a death knell on the labour market.

While Kenya has not yet reached the level of government-imposed restrictions seen in China, Spain and Italy, if the virus gets out of control, the country might be placed on total lockdown.

President Uhuru Kenyatta’s ban on travel from countries with reported coronavirus cases and closure of schools was the first firm restriction imposed to halt the spread of the disease.

As businesses suffer an abrupt cessation in economic activities, Kenyans are hoarding any little cash they have to spend on food should bad come to worse.

Non-essential goods

“I have been here since Saturday and there is hardly any shopper that has come to buy shoes, bags or belts...people are very afraid,” said Charles Munyoki who sells apparels at Jamia Mall.

He called on the government to impose rent cuts on landlords to cushion tenants who are unable to pay rent due to falling income.

In supermarkets such as Shoprite, Carrefour, Naivas and Tuskys, their grocery sections are teeming with activity as shoppers rush to bulk up their food reserves.

In the US, President Donald Trump administration wants to give cash payments to every American adult within the next two weeks to help those who have lost their jobs or otherwise hit hard times during the global coronavirus pandemic.

Trump is seeking Sh100 trillion in stimulus package to battle the virus and provide safety nets for Americans, a move that appears far-fetched for Kenya’s economy.

On Tuesday, massive outbound traffic from Nairobi was witnessed as Kenyans who have been advised to work from home travelled upcountry as part of social distancing efforts being implemented nationally.

With economic activity declining, the government yesterday expanded a raft of measures on financial transactions and lending to alleviate pressure from the citizenry.

Loan periods

Those with personal loans have been given a one-year window to repay them after it emerged that borrowers were not getting enough cash to service credit.

“Banks will review requests by borrowers to extend their loans for a period of up to one year.

If you have a current loan, until March 2, and you are experiencing difficulties paying it off because of the pandemic, directly or indirectly, you can go to your bank to negotiate for an extension,” he said during a meeting with the Head of State.

“I do not want us to have a cliff whereby by the end of this period we will end up with more problems than we started with,” added Njoroge

SMEs and corporate borrowers, Njoroge said, can contact their banks, be assessed and have discussions on restructuring their loans.