The CBK announced on Monday that a framework, to be undertaken by commercial and microfinance banks, and mortgage finance companies till May 2023, will ease the collective debts of over 4.2 million Kenyans who failed to pay Ksh30 billion ($246 million) they borrowed.
The CBK directed lenders to forego at least Ksh15 billion ($123m) the borrowers owe them, easing their debt burden by at least 50%.
The statement the CBK released, reads in part, “through the framework, the institutions will provide a discount of at least 50% of the non-performing digital loans outstanding as at the end of October 2022, and update the borrowers’ credit standing from non-performing to performing.”
The statement also read, “the institution will then enter into a repayment plan with the borrowers for the balance of the loan for up to May 31, 2023. Upon expiry of the framework, the borrowers’ credit standing with respect to these loans will depend on their repayment performance during the six-month period.”
Most of the borrowers are individuals and small business owners many of which were affected by the Covid-19 pandemic, and now the country’s current economic situation. The CBK is unsure of the borrowers’ inability to service this debt and is looking for means to ease their burden, particularly considering that some of them have lost their jobs.
“The adverse effects of the pandemic continue to linger for the covered borrowers. Accordingly, the framework is expected to enable this segment of borrowers to access credit and other financial services as they rebuild their lives and livelihoods,” the CBK stated.
According to the CBK, the objective of the framework is to improve the credit standing of mobile phone digital borrowers who had been reported to Credit Reference Bureaus (CRBs), for failing to service loans they borrowed using mobile phones.