Kenya’s small businesses stifled credit in 2020 on pandemic disruption

An employee packages goods at a warehouse of the e-commerce platform Kilimall in Nairobi, capital of Kenya, Nov. 1, 2019. (Xinhua/Yang Zhen)

The COVID-19 pandemic had a significant impact on Kenya’s micro, small and medium enterprises (MSMEs) access to finance in 2020, with many banks tightening their purses as non-performing loans rose, the Central Bank of Kenya (CBK) said in a new survey released Thursday.

The survey involved 39 commercial banks and 14 microfinance banks across the east African nation, with 94 percent of the institutions acknowledging that the pandemic affected their lending to MSMEs.

The report said more than 72,000 MSMEs in the east African nation had their loan facilities restructured as the businesses faced financial challenges.

“A total of 72,559 MSMEs loan facilities in the banking industry valued at 234.7 billion shillings (about 2.17 billion U.S. dollars) were restructured in 2020. The restructuring was largely aimed at enabling borrowers to better manage their credit performance,” said the survey, dubbed 2020 MSME FinAccess.

The central bank noted that the restructuring was prompted by the adverse impact of the COVID-19 pandemic and sought to cushion affected borrowers by easing debt servicing terms.

By comparison, commercial and microfinance banks in 2019 restructured 4,348 loan facilities valued at 191 billion dollars.

The central bank observed that owing to the generally subdued business environment, arising from the impact of COVID-19, a significant percentage of MSMEs borrowers either closed or significantly scaled down their business operations, leading to the rise in non-performing loans. Enditem

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