Why Are Banks Shying from Offering Moratoriums on Loans?
In normal times, the government would be looking for avenues to tax us to death to fund the new financial year budget which will be unveiled later in June. It seems that the outbreak of new coronavirus disease (Covid-19) will make it hard to milk extra taxes from the overburdened citizenry given the slump of business activities as companies have downsized or closed shop altogether.
And given we’re not in ‘normal times’ with this outbreak affecting almost all sectors of the economy, it is succinct to say there is less cash flow in the economy. And as such, it is a struggle for many, especially for those living from hand to mouth, to put food on the table.
So grave is the situation that were the government to impose a lockdown to control the spread of Covid-19 pandemic, the move would be unpopular as it would ignite unrest in the country. How do you lock majority with no means of sustenance in their houses where they will no doubt starve to death?
None other than the President of the Republic appealed to financial institution to go slow on those defaulting on loans, and reconsider those who were earlier listed with credit reference bureaus for consideration for loan facilities to help tide through hard times. Corporate greed would have made many of financial institutions winch, for their bottom line is squeezing extra coins from hard pressed Kenyans in name of making super profits from their high interest loan products!
A day after the presidential pronouncement, I engaged the Kenya Commercial Bank (KCB) asking for a moratorium on a pending loan, and their answer was the loan facility, disbursed through the mobile lending app, was not covered by the presidential directive. Same observed with Equity Bank, my bank of choice, which, other than making me fill an online form, didn’t bother to extend on same.
In essence, these lenders inferred the loans covered were those taken through physical visits to their respective banks. Which raises a curious question, what are those mobile based loans quantified as?
Today I had the audacity to engage KCB again for a moratorium review as I work my ass up to financial stability – this work at home rule is a millstone on the neck if you ask me – and repay them to the last coin. Unfortunately, their offer is a rollover for a month but with an extra 1% added cost! Maybe I’ll be sweating gold nuggets that will be easily converted into cash for the extra interest rate saddled on principal and earlier interest!
Going by the way these mobile based lenders goes for one in recovering that coin advanced, it is evident even if an epidemic was to decimate the population of the country overnight, they’ll still go to the graves of the defaulter armed with court orders to exhume the remains and demand their pound of fresh!
Is a three months moratorium a tall order? For the institutions that declare profits in region of billions of shillings each financial year, maybe it is.
It is nostalgic of how, during the Mwai Kibaki’s administration, most of our financial institutions were pitching tents in the streets hawking credit facilities to entice customers, compared to today when they’re worse than shylocks with interest rates in the stratospheres where borrowers are repaying almost double on the principal advanced!
And by the way, I have not a so good run-in with the KCB in the past that saw other creditors shunning my applications for credit facilities as my name was then listed. See here: https://paulkariuki.blogspot.com/2017/04/get-yourself-financial-stress-with-kcb.html