The Central Bank of Kenya (CBK), has approved new regulations intended to strengthen Kenya’s Credit Information Sharing System (CIS). In a press release, they state that they seek to enhance consumer protection for borrowers and ensure the sustainability of the CIS. This includes delisting loan defaulters from the Credit Reference Bureaus (CRB).
Press release: Publication of the Credit Reference Bureau Regulations, 2020 and Additional Measures on Credit Information Sharing pic.twitter.com/9bWiqdnaie
— Central Bank of Kenya (@CBKKenya) April 14, 2020
According to the Business Daily, Banks, SACCOs and micro-finance lenders now face a fine of Sh2 million for every defaulter they deny loans to for being listed negatively with the country’s credit reference bureaus (CRBs). Lenders can only reject a loan application due to other factors beyond credit scores earned via CRB listing.
“An institution that denies a customer a credit facility or any other financial service solely on the basis of a credit score shall be liable to a monetary penalty of two million shillings or such other sanctions under the Act, the Microfinance Act, 2006, or the Sacco Societies Act, 2008, as the Central Bank may impose,” says Treasury Secretary Ukur Yatani in the new CRB regulations.
Revised CRB Loan Regulations
The CRB regulations provide a framework for the exchange of borrowers’ credit information between:
- Commercial banks
- Microfinance banks
- Savings and Credits Societies (SACCOs)
Here are some of the noteworthy amendments to regulations of the (CRB). This is a move in a bid to bridge the information gap about borrower’s creditworthiness.
- Mobile loan apps will no longer list people on CRBs. This is due to numerous complaints about misuse of the CIS by loan apps.
- CBK SETS Sh1,000 as the minimum threshold for negative credit information submitted by CRBs.
- Anyone with a defaulted loan of below Kes 1000 has been delisted from the CRB. Subsequently, no financial institution is going to list anyone who has defaulted as long as the loan is below Kes 1000.
- First time CRB clearance certificates will be provided by CRBs at no charge.
- Loans that fall in arrears from April 1 to September 30, 2020, will not lead to blacklisting of the borrower on CRB. Their aim is to shield borrowers from the adverse impact of the novel Coronavirus.