Borrowers struggle to pay over sh600b in loans

LOAN | BANKING

The share of borrowers with high debt balances across several commercial banks doubled last year and this is likely to pile more pressure on banks to further tighten credit.

New Vision's analysis of 26 commercial bank's financial statements for the period ended December last year indicates that Non-Performing Loans (NPLs) for the sector shot up to over sh700b from about sh380b registered in 2018.

The increase represents 4.7% of the industry's total loan book. Loans are classified as NPLs if the borrower has not made regular payments for at least 90 days or the borrower has lost the income needed to repay the debt.

To put this in perspective, for example, if a borrower had a sh500,000 loan at a commercial bank and repaid sh200,000 on time, but went 90 days behind on his scheduled repayments with sh300,000 still due, the entire sh500,000 loan would be classified as NPL in the banking world.

In the New Vision today, find out what this implies for both the banks and the borrowers. Click on Epaper for your copy