Listen to This Article Enhance your reading experience by listening to this article.

Most commercial banks expect their non-performing loans (NPLs) to decline in the third quarter of 2022 ending September as they move to source and protect their funds to finance lending activities amid economic recovery.

There is anticipation that business activities will resume in the later months of the year following the conclusion of a prolonged election cycle that has ended with the William Ruto-led new administration taking over the office from today.

 About 44 per cent of banks have signaled that they will cut their NPLs by the end of this month against 23 per cent who believe NPLs will remain constant.

However, 33 per cent anticipate an upward trend in non-performing loans. “Forty-four per cent of the respondents indicated that NPLs are likely to fall in the third quarter of 2022. This is attributed to enhanced recovery efforts being implemented by most banks,” Central Bank of Kenya (CBK) said in the latest credit survey report.

Loan demand

The value of gross NPLs stood at Sh470 billion at the end of April 2022 in contrast to Sh438.3 billion at the same time last year. Gross NPLs increased by 8.6 per cent by June 2022, according to the regulator. Borrowing has tended upward in the past one year due to increased loan demand by businesses and households but repayment still remains below the pre-Covid levels.

 A surge in the number of households who lost their jobs or their businesses hammered by the pandemic has fuelled default. This has led to an overall increase of NPLs in the banking sectors.