LOANS SHOCKER
…as Kenyan banks demand hidden interest over Covid-19 relief package
NAIROBI- When the Central Bank of Kenya announced in March that lenders would offer a repayment holiday on personal and business loans distressed by the Covid-19 pandemic, there was excitement among many borrowers.
A big number were only coming to terms with sudden loss of income following tough economic shutdowns. To cushion borrowers, the banking sector regulator announced that all loans as of March 2, 2020 would be eligible for short repayment holidays or rescheduled payments of up to a year.
Among those beaming with relief at the time was 34-year-old Munyaka Njiru, who rushed to his bank to take advantage of the deal.
Njiru, the proprietor of Bucketlist Adventures, a tour firm, said he saw the repayment holiday as a huge relief on his outstanding car loan.
But Njiru now says the relief has turned into a nightmare. He regrets that if he knew then what he knows now, he would not have signed on to the deal allowing him a break from repaying his Sh200, 000 loan balance.
After six months, the bank recently wrote to Njiru demanding interest of up to Sh24, 000 that had piled up over the repayment holiday period. “The deal
with my bank would have been a huge relief for me. But it has turned into a raw deal,” Njiru said.
The bank has asked him to pay Sh45, 000 at once, failing which the loan will be considered to have fallen into arrears.
“I would not have signed up if I knew I would eventually pay more,” said Njiru, echoing the sentiments of many unsuspecting borrowers who aimed to take advantage of the relief programme.
Banks appear to have taken advantage of a broad guideline by the CBK, which allowed the lenders to restructure loans by either freezing interest payments, or fees, or offering a moratorium on interest or the principal repayments.
Borrowers who spoke to the Nation and others who have expressed their frustration on social media platforms say they were emboldened by the general wording of the regulators’ announcement, but they now accuse the lenders of having failed to disclose the full meaning of the supposed relief plan.
Another borrower who requested anonymity and is repaying a Housing Finance mortgage, however, says he spurned the restructuring offer after realising that he would end up paying more.
In a statement, the Kenya Bankers Association said lenders had the leeway to restructure loans or offer repayment holidays to their customers on a case-by-case basis.
“CBK provided the policy framework for banks to work with their clients with the prioritisation being the sectors hardest hit by Cocid-19; the cash reserve ratio reduction freed up liquidity for banks to work with clients on an individual basis to restructure facilities.
KBA would not be in a position to give a unilateral directive on how banks restructure facilities,” said the bankers’ lobby organisation in response to the Nation.