Like lemmings inexorably following the rest of their herd over the edge of a cliff, Kenyan banks have decided that they want some of the toxic loan action that their western counterparts have been enjoying. According to Business Daily Africa, a number of banks are aiming to increase the size of their loan books as the economy sinks ever lower. Truly, we are living in strange times.
In an effort to make these moves appear thoroughly pragmatic, the article states that the loans are targeted at “salaried individuals in blue-chip firms,” who must be a safe bet because their employers are “cushioned from Kenya’s battered economy.” So that’s OK, then. Move along, nothing to see here.
Of course, I would feel a little better about this exercise if our finance minister had not admitted that the Kenyan economy does not actually exist in a vacuum and is dependent on developed nations. That makes me feel that our blue-chip companies might not stay blue-chip for too long if snafus abroad have an impact on their balance sheets. Then again, the banks have said that although they are raising their loan amounts, they’re also increasing the repayment periods for same loans, so as long as those salaried employees manage to hang onto their jobs in these uncertain times, everything should work out fine. Right?
Admittedly, the OECD has savagely cut its forecast for the global economy in 2009, and only predicts growth of 0.4%, as opposed to the 4% figure it had settled on previously. But that’s OK! Because Kenyan blue-chip firms and their employees are “cushioned” from the real world! They have nothing to worry about because somehow, their businesses operate without having to involve themselves with anyone else. Marvellous!
I could riff forever on how lending to borrowers who were subsequently unable to keep up with their repayments is a huge factor in all the jiggerypokery that is still ongoing in the US economy, or how a longer repayment period does not necessarily make a loan more affordable, but I don’t want to rain on anybody’s parade. What I will say, though, is that with the interest rates as high as they are, and with inflation showing few signs of coming down any time soon, I just hope the banks know what they’re doing. I would hate to have to type the words “reckless expansionism” in a year’s time.
[Image by BartMaguire]