The Kenya Development Corporation (KDC) is grappling with a severe financial crisis, with a massive Sh33.44 billion in non-performing loans (NPLs), threatening its operations and long-term sustainability. A recent report from the Auditor General, Nancy Gathungu, highlights the extent of the crisis, revealing that nearly 86% of KDC’s total loan portfolio valued at Sh39.06 billion as of June 30, 2023 has become non-recoverable.
The report, covering the fiscal year ending June 2023, indicates that KDC has stopped accruing interest on these bad loans, which has significantly impacted the corporation’s ability to generate much-needed funds. According to the rules, once a loan becomes non-performing, the interest accrued cannot exceed the principal amount outstanding. This move has severely limited KDC’s capacity to raise revenue and continue its lending operations.
Compounding the problem, many of the loans are backed by securities such as borrowers’ ancestral lands, which have either been lost, impaired, or deemed irredeemable. This has led to a dire situation where KDC has had to make full provisions for these losses, depleting its reserves and further straining its finances.
The financial distress has also affected KDC’s ability to provide new loans to potential borrowers, thus hindering its core mission. The corporation was originally established in November 2020, merging the operations of several financial institutions, including the Industrial and Commercial Development Corporation, Tourism Finance Corporation, and IDB Capital Limited. It offers long-term financing and advisory services to individuals and businesses across Kenya.
In addition to the loan crisis, the report raised concerns about KDC’s unsold housing units, which have been sitting idle for years. Despite being completed in 2015 and 2018, the unsold apartments valued at Sh490.5 million continue to incur service charges, further draining the corporation’s finances.
Without immediate intervention, the future of KDC and its ability to fulfill its mandate of supporting Kenya’s economic growth is at significant risk.
