The central bank of Kenya denies unregulated loan apps access to credit reference bureau

In a gazette notice regarding new regulations on the credit reference bureaus, the central bank of Kenya has effectively denied popular loan apps access and thereby handicapping their ability to report loan defaulters. Kenyans have suffered immensely on these apps mainly found on the Google’s play store where a small amount of loan such as less than Ksh 1,000 could have them blacklisted affecting their credit score.  

In addition, most have been known to charge unscrupulous amounts in the name of daily interest just after the loan period expires. This has really weighed most Kenyans down especially during this difficult period of Covid-19 pandemic. These loan apps have become so popular on android phones, currently not available on iPhones due to Apple’s strict nature on privacy. Users could easily secure a loan probably repayable after just 15 days failure to which they’d be forwarded to reference bureaus or attract stiff interests each day their loan remained unpaid.

The banking sector regulator provided guidelines through which licensing and supervision of Credit Reference Bureaus (CRBs) is done. In addition, these regulations provide a framework for the exchange of borrowers’ credit information between commercial banks, microfinance banks, Savings and Credit Societies (SACCOs), other credit information providers approved by CBK, and CRBs.

According to the CBK, these regulations have been born from a consultative process that started in 2018, and are intended to strengthen Kenya’s Credit Information Sharing System (CIS) that has been operational since 2010. In particular, they seek to enhance consumer protection for borrowers, expand the sources of information and ensure the sustainability of the CIS as a key tool to bridge the information gap about the borrower’s creditworthiness.

Main reforms introduced by these CRB Regulations include;

  • To be listed in a reference bureau, a borrower must have borrowed a minimum threshold of Ksh.1,000. Consequently, borrower’s information regarding non-performing loans of less than Ksh.1,000 will therefore not be submitted to CRBs, and borrowers that were previously “blacklisted” only for amounts less than Ksh.1,000 will be “delisted.”
  • Secondly, first-time CRB clearance certificates will be provided by CRBs at no charge. This is particularly beneficial to Kenyan youth and graduates who are seeking employment.
  • SACCO societies regulated by the Sacco Societies Regulatory Authority (SASRA) have now been included as authorized subscribers of credit data to CRBs. These SACCOs will now submit borrowers’ information to CRBs and also receive credit reports directly from them.

On top of the above regulations;

  • The central bank of Kenya has withdrawn approvals granted to unregulated digital – mobile based as third party credit information providers to CRB. This according to CBK is after several complaints from the public over misuse of credit information by digital and credit only lenders.
  • Negative credit information reporting for borrowers whose loans were performing previously but became non-performing as of April 1 has been suspended until September 30th 2020.

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