Global rating agency Moody’s say in a new report on African banks that have weak risk-management practices in the past have contributed to the fairly high dud assets ratios among African banks, with many of those assessed lying above 10 percent.
Latest Central Bank of Kenya (CBK) data shows the ratio of bad loans to the total loan book among Kenyan banks stood at 12.3 percent at the end of October, having come down from 12.7 percent in August largely due to improved recovery efforts on their trade, personal and household sectors. There have been an improvement on their recovery strategies helping them reduce their debt ratio as we approach the end of the year.
“Government arrears remain high (5% of GDP on average, according to IMF estimates), hurting the loan repayment capacity of contractors and sub-contractors of government projects. Risks are compounded by the fact that-in some cases problematic direct and indirect exposures to the government are not classified as nonperforming,” said Moody’s in the report.
But interestingly, out of 11 African countries profiled by Moody’s in the report, only Angola, Ghana and Democratic Republic of Congo have a higher ratio than Kenya, at about 25%, 22%, and 18% respectively.
It has also been said that the introduction of new IFRS 9 accounting standards across most countries in Africa have signalled a
rise in loan-loss provisioning coverage(thus cutting risks associated with bad loans)
With this recovery steps outlined by the central bank of Kenya, we hope they can lift themselves from this tricky situation as the end of year approaches.