Parliament urged to disband credit reference bureaus

Parliament has been petitioned to amend the Banking Act to stop the use of credit reference bureaus (CRBs).

Peter Kimani Runo, the petitioner, also wants the National Assembly’s Finance, Planning and Trade committee to commence proceedings to change any other relevant laws.

Kenya licensed its first CRB in 2010 in what was expected to lead to lower commercial lending rates by improving credit information availability in the banking sector.

But despite the presence of a credit information pool, commercial banks are yet to pass on the benefits, critics say.

“The petitioner avers that Credit Reference Bureaus have listed more than 700,000 individuals in their database as defaulters,” Justin Muturi, the National Assembly Speaker told MPs while communicating the petition to the House.

Mr Runo claims that the listing of loan defaulters is causing a lot of anguish to the listed individuals as they are unable to access financial facilities from local banks and other financial institutions.

Prior to CRBs introductions, banks maintained that lack of credit reference information was major contributing factor to soaring costs of credit due to incomplete borrowers’ information.

“In the petition, the petitioner prays that the National Assembly through the departmental committee on Finance, Planning and Trade initiates the process of amending the Banking Act and any other relevant laws to disband Credit Reference Bureaus,” Mr Muturi said.

According to the Central Bank of Kenya, CRBs help lenders make faster and more accurate credit decisions.

The CRBs collect, manage and disseminate customer information to lenders.

Credit bureaus also assist in making credit accessible to more people, and enabling lenders and businesses reduce risk and fraud.

The credit information sharing was expected to reduce risk premiums in the pricing of credit.

Creditinfo Credit Reference Bureau limited, Credit Reference Bureau Africa limited t/a TransUnion and Metropol Credit Reference Bureau limited are the only licensed CRBs registered by the Central Bank of Kenya.