Kelvin Mutisya, an auditor at a mid-sized consultancy firm in Nairobi, is worried about his next paycheck as the moratorium on a loan he had taken from a bank comes to an end.

The father of two has a 5-year check-off loan he took in 2018 to purchase a plot in the outskirts of the capital.

In March, following the outbreak of Covid-19, his employer slashed his salary by 20 per cent as part of the shared sacrifice so that none of the colleagues could have to be fired. In response to the salary cut, he approached his bank to renegotiate the terms of his credit facility. He was offered a three-month moratorium, which deferred repayment of his loan to August.

Kelvin was in the ranks of private sector workers whose loans formed the majority of facilities that were restructured as banks sought to ease the pain for borrowers.

Data from the regulator shows that most of the loans were extended for 9-12 months.

Like others, Kelvin had initially thought the pandemic would end within a few months and things would go back to normal.

Things are yet to go back to normal and for people like Kelvin, the full weight of the pandemic is set to be felt more from August.

“When I signed-up for a three-month moratorium in April, I was working with the assumption that my salary would have been restored by August,” Mr. Mutisya told Moolah. “The Covid-19 situation in the country remains very fluid with no predictable end in sight. This has continued to depress businesses; I am not sure if my bank will extend the moratorium to the end of the year.”

CBK reported that over KSh880 billion worth of loans had been restructured by July.

Given that the credit restructuring was not standardized, says Jared Osoro, the Director of Research at the Kenya Bankers Association, there is some wiggle room for people like Kelvin.

“The basis of credit restructuring was on the level of an individual’s cash flow and how they were impacted by the pandemic. Some customers’ cash possession is now worse off than they were when the pandemic started,” says Mr. Osoro. “For such customers, they’ll have to approach their banks to either extend the tenure of the loans or restructure the repayment amounts.”

This scenario provides a conundrum for both banks and the customers, says Johnson Nderi, Manager, Corporate Finance and Advisory, ABC Capital Ltd.

“The only option for bank customers that are not able to meet their loan obligations is to negotiate for extension of the moratorium,” Mr. Nderi said.

For, banks, Jared says, they will have to look at the asset classification. “As the moratorium for these credit facilities lapses, banks will have to reassess how they report the asset classification,” Mr. Osoro noted. “Banks will either have to take a hit or go for foreclosure especially for secure loans.”