NAIROBI, Kenya – The Kenya Development Corporation (KDC), a state-owned financial institution, is teetering on the brink of a financial crisis as it struggles to recover loans worth Sh33.44 billion, which account for a staggering 86% of its total loan portfolio.
This alarming revelation comes from a report by Auditor General Nancy Gathungu, covering the fiscal year ending June 2023.
The report highlights that the institution’s total loan portfolio stood at Sh39.06 billion as of June 30, 2023.
However, the bulk of this—classified as non-recoverable—has led to a cessation of interest accrual on the loans, further constricting the corporation’s revenue stream.
KDC has already made a full provision for the Sh33.44 billion losses against its reserves, as mandated by International Financial Reporting Standard No. 9.
The inability to recover these loans, coupled with the provision, underscores the dire financial health of the institution.
“The high ratio of non-performing loans indicates the corporation is unable to recover money owed by its customers,” Auditor General Gathungu stated. “This raises concerns about its ability to meet its purpose and mandate going forward.”
The report also flagged issues with collateral tied to some of the defaulted loans.
Many were backed by ancestral land, some of which are now untraceable, impaired, or irredeemable—further compounding KDC’s recovery challenges.
The corporation’s struggles highlight systemic weaknesses in loan management and collateral tracking, raising questions about governance and risk assessment processes within KDC.
KDC’s woes extend beyond loans. The Auditor General raised concerns about unsold housing units developed as part of the corporation’s investments.
As of June 2023, 35 units valued at Sh490.5 million remain unsold, years after their completion—11 at Zamia Heights (completed in 2015) and 24 at Oceania Apartments (completed in 2018).
These properties are also draining resources, with KDC paying a Sh10,000 monthly service charge per unit to property management firms.
KDC was established in November 2020 following the merger of the Industrial and Commercial Development Corporation, Tourism Finance Corporation, and IDB Capital Limited.
Its mandate is to provide long-term financing, investment, and advisory services to spur economic development.
However, the current financial strain could derail its ability to extend loans to new borrowers, jeopardizing its mission to drive national development.
This alarming revelation comes from a report by Auditor General Nancy Gathungu, covering the fiscal year ending June 2023.
The report highlights that the institution’s total loan portfolio stood at Sh39.06 billion as of June 30, 2023.
However, the bulk of this—classified as non-recoverable—has led to a cessation of interest accrual on the loans, further constricting the corporation’s revenue stream.
KDC has already made a full provision for the Sh33.44 billion losses against its reserves, as mandated by International Financial Reporting Standard No. 9.
The inability to recover these loans, coupled with the provision, underscores the dire financial health of the institution.
“The high ratio of non-performing loans indicates the corporation is unable to recover money owed by its customers,” Auditor General Gathungu stated. “This raises concerns about its ability to meet its purpose and mandate going forward.”
The report also flagged issues with collateral tied to some of the defaulted loans.
Many were backed by ancestral land, some of which are now untraceable, impaired, or irredeemable—further compounding KDC’s recovery challenges.
The corporation’s struggles highlight systemic weaknesses in loan management and collateral tracking, raising questions about governance and risk assessment processes within KDC.
KDC’s woes extend beyond loans. The Auditor General raised concerns about unsold housing units developed as part of the corporation’s investments.
As of June 2023, 35 units valued at Sh490.5 million remain unsold, years after their completion—11 at Zamia Heights (completed in 2015) and 24 at Oceania Apartments (completed in 2018).
These properties are also draining resources, with KDC paying a Sh10,000 monthly service charge per unit to property management firms.
KDC was established in November 2020 following the merger of the Industrial and Commercial Development Corporation, Tourism Finance Corporation, and IDB Capital Limited.
Its mandate is to provide long-term financing, investment, and advisory services to spur economic development.
However, the current financial strain could derail its ability to extend loans to new borrowers, jeopardizing its mission to drive national development.
