M-Shwari defaults increase fourfold

NCBA MD John Gachora. [File, Standard]

Bad loans on M-Shwari surged more than four times during the Covid-19 period as borrowers distressed by the pandemic struggled to service their loans.

NCBA Bank Managing Director John Gachora said non-performing loans (NPLs), those which have not been serviced as a percentage of total mobile loan disbursements in a month, increased when Kenya reported its first case of Covid-19 in March.

“Historically, our NPL ratio has been around 1.8 per cent on M-Shwari. Now we have seen those numbers go up as far as eight per cent,” he said in an interview with The Standard, adding that the bad loans have since been coming down.

NCBA runs M-Shwari, a mobile lending platform, jointly with telecommunications service provider Safaricom.

The statement by Mr Gachora came as the Central Bank of Kenya announced that the emergency measures that suspended blacklisting of borrowers who defaulted on their loans came to an end after a six-month break.

“If a loan is in arrears after 60 days from October 1, a financial institution will, in accordance with the existing procedures, give the borrowers notice of the intention to list them with the credit reference bureaus,” said CBK in a statement yesterday.

Following the outbreak of Covid-19, the government implemented stringent containment measures aimed at curbing the spread.

As a result, a lot of economic activities were hampered leading to massive job losses, with official data showing that 1.7 million people lost their source of livelihood.

Most of the cash-strapped Kenyans struggled to meet their debt obligations, with the number of bad loans as a percentage of total loans rising to 13.6 per cent in August from 12.7 per cent in March.

Gachora said NCBA, which is marking a year since its formation from the merger of CBA and NIC banks, had seen the monthly disbursement on M-Shwari double from Sh7 billion in September last year to Sh14 billion in December.

However, by June, that number had reduced to Sh8 billion, he said.

Disbursement of mobile loans on KCB M-Pesa, another mobile lending platform between KCB and Safaricom, declined by 12 per cent from Sh103.1 billion in the first half of 2019 to Sh90.6 billion in the first six months.

In June, NCBA disclosed that the bank’s increase in loan impairments for the year was due to mobile loans.

“We are taking a good number of measures, working with our partners Safaricom to stem these challenges,” said Gachora.

One of the measures taken was to shift most of loans of less than Sh2,000 to Fuliza, an overdraft facility on M-Pesa.