Tourism tops key sectors in bad debt rise

Gross non-performing loans in the tourism sector grew 11 percent to Sh7.8 billion in the quarter to June 2019 from Sh7 billion, the newly released quarterly economic review by the Central Bank of Kenya (CBK) shows.

The double-digit growth in the sector’s dud assets was the highest compared to the other 10 main sectors as classified by the regulator.

Interestingly, the sector’s output grew by an average of 10.35 percent in the first two quarters of 2019 according to the Kenya National Bureau of Statistics (KNBS) quarterly Gross Domestic Product (GDP).

Personal (Household loans) contribution shot past the Sh50 billion mark for the first time to hit Sh52.3 billion, representing a seven percent growth from Sh48.7 billion as at March 2019.

Trade sector remained the highest contributor of bad loans for the banking industry, with the sector holding Sh89.4 billion in such debt on recording a two percent growth in the period.

Agriculture, which contributes up to 34 percent of the country’s total output saw its bad loans edge up marginally by two percent to Sh15.1 billion, while transport registered a four percent growth to Sh21.8 billion.

Over the three months, seven out of 10 sectors recorded an increase in bad loans, clearly painting a picture of a hard-pressed economy.

Manufacturing (Sh55 billion), building and construction (Sh24 billion) and financial services (Sh6.8 billion) were the only sectors to report a decline of two percent and three percent for the latter two respectively.

Bad loans have since risen to Sh346.4 billion by the end of November 2019, growing by Sh10.5 billion compared to the Sh335.9 billion in June as reported by the central bank.

On the flipside, non-performing loans ratio fell marginally to 12.4 percent compared to 12.6 percent in June as a result of the total loan book growing faster compared to dud assets.

On the outlook of the banking sector, the regulator projects a more stable future but remains gloomy on credit growth.

“Credit risk is expected to remain elevated in the short to medium term as shown by increasing trend levels of non-performing loans,” said the report.

In reality, the global slowdown over Covid 19 virus could make the scenario worse.