BANKS have now imposed strict conditions for providing small loans as a precaution after many borrowers failed to repay loans due to the difficult economy.

A new study conducted by the Central Bank of Kenya (CBK) three months to December 2023, showed that banks have tightened and increased conditions for small loans as a way to prevent the rise of unpaid loans. This comes at a time when banks also expect personal loans, furniture, home and commercial products to rise in the quarter of this year ending at the end of this month.

Many banks have been using guidelines for issuing debts that mainly focus on a person’s ability to pay his debts and the amount he should take. More than half of the 38 licensed banks or 54 percent of those who participated in the study admitted that the number of non-performing loans is expected to rise in the first quarter of 2024.

The tightening of the law for various banks, especially regarding small loans, comes at a time when many families have now resorted to loans to meet various needs. These needs are like food, rent and other small things that would have been easy to fulfill before due to their salaries.

According to statistics from CBK data, the amount of small loans for home use was Sh524.1 billion as of December 2023 if it increased by 2.5 percent the previous year. By the end of last year, the amount of outstanding loans reached Sh621.3 billion from Sh635.8 billion in November.

March 8, 2024

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