Critically, the terms of the curatorship as announced by the Governor on 10 August are designed to ensure that the bank remains open for business, preventing an abrupt halt to credit extension to the important segment of the market (low income earners) which African Bank serves.
Such credit extension, however, is now done on much sustainable terms, given the need to improve asset quality in the banking book of the “good bank”. Given the isolated nature of the intervention, and the uniqueness of African Bank’s previous business model, the concern that higher rates will impose an unbearable burden on borrowers, with dire consequences for lenders in general is overstated.