CRB ordered to stop blacklisting borrowers who default repayment of Sh1,000 or less
The Central Bank of Kenya (CBK) has ordered the delisting of Kenyans, who have defaulted their loans with less than Sh1,000 from Credit Reference Bureaus (CRBs).
The CBK has also said individuals seeking CRB clearance certificates for the first time will not be charged.
“A minimum threshold of Sh1,000 has now been set for negative credit information that is submitted to CRBs by lenders. Borrower’s information regarding non-performing loans of less than Sh1,000 will therefore not be submitted to CRBs, and borrowers that were previously “blacklisted” only for amounts less than Sh.1,000 will be delisted,” CBK said in a statement dated April 14, 2020.
CBK has published new regulations which on Credit Reference Bureaus (CRBs), replacing previous rules set in 2013 following a consultative process with players which started in 2018.
This according to the reserve bank is in response to the misuse of the credit information sharing (CIS) system by the credit-only lenders, after numerous complaints by Kenyans.
SACCO societies have been included as authorized subscribers of Credit data to CRBs as they will now be required to submit borrowers’ information and receive credit reports directly from them.
Unregulated digital and credit only lenders have also been banned from submitting names of loan defaulters for blacklisting at the Credit Reference Bureaus (CRB).
“With immediate effect, CBK has withdrawn the approvals granted to unregulated digital mobile-based and credit-only lenders as third party credit information providers to CRB. The withdrawal is in response to numerous public complaints about misuse of CIS by the unregulated digital and credit only lenders, and particularly their poor responsiveness to customer complaints,” CBK said.
“Thus unregulated digital and credit-only lenders will no longer submit credit information on their borrowers to CRB,” CBK further said.
The barring of unregulated mobile lenders from listing borrowers makes up additional measures on CIS whose publication has been done alongside the 2020, CRB regulations.
The number of borrowers blacklisted by CRBs stand at 3.2 million. These are mainly small-scale traders who have defaulted on small loans borrowed through their mobile telephones and stand locked out from credit.
The listing with the CRB represents a 12 per cent rise in non-performing loans in the country up from 9.5 per cent in the year 2017.
Of the 2.7 million who were listed with the CRB in 2017, more than 400,000 people have been blacklisted for defaulting on loans of Sh200 and below.
A total of 16.6 per cent of digital borrowers take up one loan to pay another, ensnaring them in a vicious cycle.
Digital borrowers asking for low amounts (such as Sh200) were found to incur high costs to the point where when paying the principal and interest, they were likely to be in a worse off position than they were before the loan.
According to data from the Central Bank of Kenya (CBK), most of these defaults have been fueled by mobile digital borrowing and defaults.
Last month, President Uhuru Kenyatta directed that Kenyans who failed to pay their dues by April 1 should not be listed with the CRB.
The directive did not cover at least 3 million Kenyans listed with the CRB.
The president on March 25 proposed temporary suspension of the law requiring loan defaulters to be listed with the CRBs as part of measures to cushion workers and businesses from effects of Covid-19 outbreak.