Absa Kenya #ticker:ABSA has restructured Sh54 billion loans, equivalent to about 26.7 percent of its net loans at the end of March, as it seeks to cushion customers hit by the coronavirus crisis.
The lender says 90 percent of the reviewed loans are from workers hit by job cuts and unpaid leave and small businesses that need urgent help to survive the economic slowdown caused by the disease.
Bank loans in excess of Sh360 billion have been restructured, following a loosening of the rules by the Central Bank of Kenya (CBK) in March.
World Bank expects Kenya’s economic growth will slow down to 1.5 percent this year, and contract one percent in the worst-case scenario as the virus saps demand from trading partners like Europe, as well as disrupt supply chains and domestic production.
This has led to layoffs, reduced cash flow for businesses and forced unpaid leaves, which have set the stage for loan defaults.
“We are working together with them (customers) through this loan relief programme to reduce the burden on their monthly financial obligations,” said Jeremy Awori, CEO of Absa Kenya.
The relief, which is being determined on a case-by-case basis, applies to personal loans, mortgages, asset finance, credit cards and business loans with the repayment holiday of up to three months.
Borrowers do not incur additional restructuring costs, but will pay loan interest accrued during the repayment holiday period, the bank said.
Absa did not comment on the potential impact of the loan restructuring on its earnings this year.
Its net profit for the three months to March rose 2.8 percent to Sh1.95 billion.
Kenya has 3,727 confirmed cases of Covid-19.
Its economy, which relies on farming, tourism and cash sent home from its citizens abroad, is suffering from job losses caused by the crisis.
Citing a study in April, the CBK said 75 percent of small businesses surveyed had said without help they would close by the end of June because they lacked credit buffers and other resources to survive the slowdown.
Apart from allowing lenders to offer relief to distressed borrowers, the central bank has also cut lending rates and lowered the ratio of cash that commercial banks are required to hold.
Authorities have also reduced value added tax by two percentage points to 14 percent as well as cut income and corporate taxes to ease the economic shocks from the disease.
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