The objective of the Central Bank of Kenya (CBK) is to reduce domestic debt inside the nation.
- The Kenyan Central Bank has requested that lenders reduce their loan servicing costs by at least 50%.
- At least 4.2 million Kenyan debtors would have their debts cancelled in part.
- The action is intended to lessen the burden on people and small-business owners who were impacted by the Covid-19 outbreak.
The Kenyan Central Bank (CBK) said on Monday that a framework will be implemented by commercial, microfinance, and mortgage financing institutions through May 2023, easing the cumulative debts of more than 4.2 million Kenyans who had borrowed Ksh30 billion ($246 million) but hadn’t paid it back.
In order to reduce the borrowers’ debt by at least 50%, the CBK ordered lenders to forfeit at least Ksh15 billion ($123m) that they are owed by the borrowers.
“Through the framework, the institutions will grant a discount of at least 50% of the non-performing digital loans outstanding as of the end of October 2022, and update the borrowers’ credit standing from non-performing to performing,” the CBK’s statement reads in part.
The institution would then work out a repayment schedule with the borrowers for the remaining loan amount until May 31, 2023, according to the statement. The performance of the borrowers’ repayment during the six-month period will determine their credit standing with regard to these loans once the framework expires.
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