Main entrance at the Central Bank of Kenya. [File, Standard]

The proportion of loans that have remained unpaid for at least three months has fallen to a 19-month low on increased repayments and recoveries amid the easing of coronavirus economic hardships.

Central Bank of Kenya (CBK) data shows the non-performing loans (NPLs) ratio—which tracks the portion of loan book for which principal or interest has not been paid for 90 days—dropped to 13.1 per cent in December.

The latest figure is the lowest since May 2020 when it stood at 13 per cent and points to the pace of loan repayments and recoveries such as auctions growing at a faster pace than new lending.

"Repayments and recoveries were noted in the manufacturing, personal and household, transport and communication and building and construction sectors,” said CBK yesterday as it retained its benchmark lending rate at seven per cent for the 12th successive session.

The reduced pace of growth in loan defaults has come on the back of the government lifting the curfew in October last year and announcing a 13-point stimulus package to support economic recovery.

CBK had said in the September 2021 credit survey report that majority of banks (41 per cent) it polled expected loan defaults to fall in the quarter ending December 2021.

The NPLs ratio hit a high of 14.6 per cent in March last year on the back of economic hardships such as layoffs but has been coming down in line with the reduction of Covid disruptions.

The latest NPL ratio is inching towards the 12.5 per cent that was in place in March 2020 when the first case of Covid-19 was reported in Kenya, triggering layoffs, salary cuts and closure of companies.

Banks have raised lending to the private sector on the back of falling loan defaults, with the loans to this segment growing at 8.6 per cent in December.

At 8.6 per cent, credit growth to the private sector is at the fastest pace in 10 months, only beaten by February 2021 when it grew at 9.6 per cent. 

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