Why HF Group is auctioning customer houses
|Image caption: HF Group CEO Robert Kibaara (center). CREDIT| HF Group|
HF Group (HFCK) plans to auction Ksh2 billion worth of customer houses to recover unpaid property loans. This comes as the property developer and financier struggles to improve its financial performance.
HF Group made a loss of Ksh158.3 million in the first quarter of 2019, compared to a profit of Ksh37 million in a similar period last year. The company made a loss of Ksh598.2 million in 2018 full-year period. That contrasted sharply to a profit of Ksh126.2 million that HF Group reported for 2017 full-year period. As a result of the 2018 loss, HF Group decided to withhold dividend payment.
A tight lending environment and soaring costs have led HF Group to losses in the recent periods. Generally, Kenyan lenders are struggling to make money from their loan businesses because of a law that limits the interest rate they apply on loans. The rate cap law has discouraged banks from extending loans to small businesses and other borrowers they view as high-risk. Consequently, banks are not taking full advantage of the demand for loans from small business borrowers and they have complained this is hurting them.
Whereas HF Group has reduced its workforce in a bid to control costs, there is little the company can do about the rate cap law that it has blamed for some of its troubles.
HF Group shares fell 9.33% on Friday to close the week at Ksh3.50.