State-owned development finance institution Kenya Development Corporation (KDC) is grappling with a Sh33.44 billion loan default as borrowers fail to repay.
A report by Auditor General Nancy Gathungu reveals that 86% of KDC’s loan portfolio, valued at Sh39.06 billion as of June 30, 2023, is deemed non-recoverable, threatening the corporation’s operations.
“The corporation has ceased accruing interest on these loans, denying itself much-needed revenue, as required by regulations limiting interest accrual to the outstanding principal for non-performing loans,” the report states.
Additionally, some securities for older non-performing loans, including ancestral lands, are missing, impaired, or irredeemable. To address the losses, KDC’s board has approved a Sh33.44 billion provision against the corporation’s reserves, following International Financial Reporting Standard No. 9.
Gathungu warns that the high ratio of non-performing loans undermines KDC’s ability to lend to new borrowers, jeopardizing its mandate.
Established on November 27, 2020, KDC consolidated operations of the Industrial and Commercial Development Corporation, Tourism Finance Corporation, and IDB Capital Limited to provide long-term financing, investments, and advisory services.
The report also highlights concerns over 35 unsold housing units valued at Sh490.5 million, completed as part of KDC’s investments. Despite being completed years ago—Zamia Heights in 2015 and Oceania Apartments in 2018—11 out of 28 Zamia units and 24 out of 36 Oceania units remain unsold, attracting monthly service charges of Sh10,000 per unit.
The report underscores the urgent need for measures to improve loan recovery and optimize investment performance.
