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CRDB cancels 50bn/- in bad debts

CRDB cancels 50bn/- in bad debts


The bank, which is the largest in terms of assets, deposits and loan portfolio, said it issued loans to the cotton sector worth about 70bn/- but received only 18bn/-, leaving its books with huge bad debts. CRDB’s Managing Director, Dr Charles Kimei said the amount enabled the bank to reschedule loans agreement stretching the payback period to ten years.

“The idea behind this move was to enable debtors to repay their loans but the sector is still not performing well,” Dr Kimei told reporters last week when presenting the bank’s financial results. Since 2008 cotton production remained at around 150,000 tonnes per year compared to almost 300,000 tonnes produced before the world financial crisis the same year.

“Bad the cotton prices in the world market also crunched dashing debtors’ ability and hope to service their debts,” the MD said. In last year’s financial performance, CRDB’s pre-tax profit dwindled by 20 per cent to 51bn/- after cancelling 50bn/- worth of bad debts, mostly coming from lending to the cotton sector.

“Despite the shortfalls, the bank will continue lending the agriculture sector by putting good credit risk management strategies,” Dr Kimei said. In 2011, the cotton industry received 120bn/- out of 690.5bn/- loans to the agro-sector. This represents over 50 per cent of its total loan portfolio of 1.1trn/-.

In 2009, the government issued a stimulus package of 1.7trn/- towards saving the cotton industry. However, Members of Parliament during the previous session demanded to know the recipients of the rescue fund after it was established that over 18bn/-was paid to ‘ghost’ companies. The Controller and Auditor General’s (CAG’s) report also revealed that, another 48bn/- ‘went missing.’

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