Kenyan CRBs drop 337 digital lenders from forwarding names of defaulters for backlisting

Kenyan credit reference bureaus have barred 337 unregulated digital lenders from forwarding names of defaulters for blacklisting. This comes a few months after Kenya’s financial sector regulator – the CBK unveiled new guidelines outlining how names of defaulters should be forwarded to the bureaus. According to the CRBs, only 2,254 firms have been allowed to forward names, a significant drop from previous 2,332 as of September last year.

In the wake of the current pandemic, the central bank of Kenya issued new regulations governing circumstances under which someone was to be forwarded for blacklisting. The guidelines included delisting of people with less than Ksh. 1,000 in defaults. Some lenders reacted by increasing the minimum amount someone would be required to borrow such as M-Shwari while others ceased operations altogether.

Unregulated lenders have been accused of misusing the credit information sharing (CIS) mechanism and even resorted to unscrupulous ways to force borrowers to pay back loans. The most notable means used by these lenders included shaming borrowers by sending text messages to contact of the person instructing them to inform borrowers to pay.

Pre-covid-19 period experienced a surge in number of digital lenders in the country. Kenyans were wooed with quick loans that didn’t necessarily require any form of security and in return borrowers were to pay back at exorbitant interest rates. This led to most people in the country becoming slaves to lenders, you’d repay back with the assumption to take another loan at least increasing the repayment period.

In a statement, the CBK attributes their withdrawal to numerous complains from the public over misuse of credit information sharing. Digital lenders such as Tala and Branch were barred from Metropol, TransUnion and Creditinfo International.

Millions of Kenyans had been blacklisted as defaulters following economy crunch where job cuts and near stagnant wages exposed thousands of people to debt traps. Last year alone, more than 2.7 million Kenyans had been blacklisted as a result of loans less than Ksh. 1,000.  

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