Blacklisted small loan defaulters to benefit in review

Plans are underway to reduce the period that small loan defaulters across the region are retained in the database of credit reference bureaus after they finalise their payments.

The move is intended to allow small loan defaulters to access new credit faster, following concerns that all defaulters were being blacklisted for the same period regardless of their loans varying in size and date of maturity.

“The retention period for loan defaulters in CRBs should reflect the risk that is attached to their credit facilities,” said chief executive of the Association of Kenya Credit Providers, Jared Ketenga.

For example, Kenya has a blanket blacklisting period of five years for all defaulters, meaning that even after paying the last instalment, the defaulter’s name is held in the CRB database for five years.

The proposal to adjust the period bad borrowers are retained in the database was part of resolutions by a group of African countries that gathered in Toronto, Canada recently for the 10th World Consumer Credit Reporting Conference.

Countries discussed ways of enhancing effective credit information sharing on the continent and also resolved to form a Pan-African credit reporting association.

A taskforce of five countries comprising Kenya, Tunisia, South Africa, Nigeria and a representative from the group of eight countries forming the West African Economic and Monetary Union was selected to lay the groundwork for the grand association.

“It is important to harmonise the retention period across the borders especially with the East African region moving towards cross-border credit information sharing,” said Mr Ketenga.

Sam Omukoko, the managing director of Kenya’s Metropol Credit Reference Bureau supported the proposal. “It is something that needs to be considered other than just having a blanket retention period,” he said.

The credit reference bureaus in each of the five EAC countries are at different stages of development in terms of data providers and the nature of information to be shared. For example, Kenya, Rwanda, Uganda and Tanzania all have private CRBs, while Burundi in 2012 established a government-owned bureau.

“Each of the national systems have to arrive at a common level to enable them to integrate,” said chief executive of the Kenya Bankers Association, Habil Olaka.