rom his house in Nairobi, banker turned financial vlogger James Mumo contemplated the state of Kenya’s post-pandemic economy. “It’s hopeless for a normal businessperson just trying to make a living for their family,” he says. The economic crisis caused by the pandemic and ensuing lockdowns has left many struggling: 1.7 million Kenyans lost their jobs between April and June 2020, while 20.8 million borrowed funds using a programme provided by popular mobile carrier Safaricom, double last year’s number. One financial services conglomerate headquartered in Nairobi bought a yard to store all the cars it had repossessed after customers couldn’t repay their loans. Mumo, who uses his YouTube channel to share financial advice after years in banking, is concerned. “People are suffering as they can’t access cheaper finance from banks,” he says. Kenyan banks allowed customers to request loan holidays as the country went into lockdown, but this did little to fill the gap for many struggling to survive without a regular income, leaving them vulnerable to loan sharks. “Predatory financing is really taking root in this country at the moment,” he says. Governments across the developing world are struggling to adapt to widespread financial losses due to Covid-19, compounded by debt repayment to private creditors. The grouping of the largest economies, the G20, meets in Saudi Arabia this weekend, and will urge private credit institutions to suspend debt repayments, ideally to allow more spending on combating the pandemic. Big banks and asset management companies hold trillions in debts. Members of the Africa Private Creditor Working Group hold more than $9tn in assets in Africa, while the asset management company BlackRock holds almost $1bn in bonds in Ghana, Kenya, Nigeria, Senegal and Zambia. The International Monetary Fund and the World Bank provided a slew of funds to countries in need of emergency finance earlier this year, intended to blunt the financial blow of the pandemic and aid the response. The G20 also agreed to suspend government-to-government repayments under the Debt Suspension Service Initiative (DSSI) to which 43 countries have signed up. But private creditors have so far resisted, and the G20 lacks a mechanism to force them. “It is clear that a voluntary approach has not and will not work,” says a coalition of civil society groups including Oxfam, Global Justice Now and Christian Aid. The refusal to refinance debt has pushed the burden from governments to domestic banks and finally to people. According to Mumo, in Kenya the average citizen is stuck, forced to stay at home but lacking any financial support such as furlough schemes. The result has been a spike in people seeking private credit, whether from the growing number of digital lending platforms in the country attached to the microcredit industry, or from individual private lenders. “If you can’t get a bank loan, it’s very possible for someone to say let me give you a contact,” Mumo says. This sometimes includes bank staff, he adds, who may refer customers who have been refused bank loans to their own microfinance companies, charging high interest rates. “These are the kind of people ready to give you money without many conditions, as they make much more from you,” he says. “If you borrow $1,000 from them at 15% per month, in six months they’ve basically doubled their money, so they’re willing and ready to give you money. Some are offering just two hours to get you your money,” he says. Kenya declined to enter the DSSI, fearing, like a number of other eligible countries, that doing so would lead to a downgrade of the country’s credit rating, causing harm in the long term. Analysts say the lack of debt suspension from banks and asset management companies counteracts the benefits of the DSSI for countries opting in. Almost a third of what is owed by DSSI-eligible countries is to private creditors. “The G20 suspension initiative was in effect bailing out private creditors,” says Dario Kenner, an analyst at the Catholic Agency For Overseas Development. Kenner says money saved through bilateral debt suspension under the DSSI is rerouted to service foreign debt. Sometimes that debt is held in foreign currency bonds known as Eurobonds whose repayment costs have increased due to currency fluctuations and high interest rates. “Effectively these countries are using money freed up elsewhere to continue paying private creditors,” he says. A joint IMF-World Bank statement in October said three countries participating in the DSSI unsuccessfully asked private creditors to join the initiative. “Most DSSI-eligible countries so far assessed that the costs of requesting a debt service rescheduling from their private creditors outweigh the short-term benefits,” it said. Anti-corruption watchdogs and the UN also point to the role of banks and private creditors in facilitating the flow of illicit money out of the developing world into the developed, the laundering of vast sums gained by crime, corruption and tax avoidance, an amount that sometimes exceeds inflows of foreign aid. Kenner says pressure remains on governments to act on debt relief. “It would be virtually impossible for one bank or asset manager to act alone,” he says. “Each creditor is waiting on the other. This is why we’re saying G20 governments need to step in, the whole point is that countries need this money right now to fund health systems.” HSBC, Goldman Sachs, UBS, Legal & General and JP Morgan were either unavailable for comment on the issue of debt suspension to developing countries, or declined to comment. BlackRock declined to comment on the record.