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As Covid-19 pandemic continues to negatively affect businesses, banks have started shying away from financing micro, small and medium enterprises (MSMEs) they consider risky even as they struggle with non-performing loans (NPLs).

Anthony Musyoka, Vice Chair, Motor Vehicle Assemblers and Accessories said in the face of the pandemic, banks are tightening up the mode of vetting customers.

“We have to be very creative in terms of getting financing for our customers as the lenders are a bit skeptical financing certain types of businesses,” he said.

According to data from the Central Bank of Kenya (CBK), the percentage of gross NPLs to the industry’s total loan book rose to a high of 12.7 per cent in February from a lower 12 per cent in December, with the stock of defaults growing in the manufacturing, energy and household sectors.

Public listed banks’ NPL cover rose to 58.5 per cent in 2019 as the 24 months window to the implementation on new financial reporting rules closed.

Musyoka is quoted in a new survey conducted by KPMG on behalf of the Kenya Association of Manufacturers (KAM) in a survey that targeted its membership base.

The study focused on employment, business resilience, the impact of the economic stimulus package announced by President Uhuru Kenyatta and proposals to further cushion the economy from the adverse effects of the pandemic.

Ashit Shah, the chair of Motor Vehicle Assemblers and Accessories sector, said though the first two months were good, from March things went south. 

“We cannot now afford a return on investment,” he said, a sentiment supported by Amir Parpia, Chairman, Food Sector.

People are digging into their own pockets, but these are not bottomless pockets,” said Parpia

In the report, manufacturers are now shifting their focus or ramping up production of essential goods to survive the Covid-19 pandemic.

According to the report, 23 per cent of manufacturers from 10 out of the 14 sectors are now producing essential goods like personal, protective equipment (PPEs), bedding, sanitisers, disinfectants, canned foods and immunity boosting products, hospital beds, and ventilators.

However, despite the impact of the pandemic on the local industry, 81 per cent of manufacturers say they will not close down their businesses.