StanChart’s Kenya Unit to Harness Customers’ Savings as Security

(Bloomberg) -- Standard Chartered Plc.’s Kenya unit plans to issue loans backed by customers’ investments in mutual funds amid an increase in bad debt as clients struggle with repayments in the wake of the coronavirus pandemic.

Kenya’s fifth-largest lender by value wants to harness the 100 billion shillings ($914 million) in assets under management in its wealth business as collateral instead of solely relying on land title deeds and vehicle logbooks, according to Chief Executive Officer Kariuki Ngari.

Loans have been souring since the government in East Africa’s biggest economy announced a lockdown to check the spread of Covid-19. Non-performing loans climbed to 14.1% in December and lenders restructured 54% of the sector’s 3 trillion-shilling ($27.4 billion) loan book to relieve borrowers, according to central bank data.

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Even amid struggling businesses and households, StanChart’s assets under management jumped 53% in 2020, compared with 45% compounded growth during the prior three years, as customers stuck at home due to Covid-19 lockdowns turned to mobile phones to invest through the bank’s digital platform, Ngari said. The bank now wants to rope in those savings as collateral.

If “you’ve taken an investment and probably want to borrow something against it, we want to enable that,” Ngari said in an interview in the capital, Nairobi. “That’s how the rest of the world operates. There’s no reason why Kenya can’t operate like that.”

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