Four million loan defaulters to be removed from CRB list

The Central Bank of Kenya. PHOTO | DENNIS ONSONGO | NMG

More than four million loan defaulters will be removed from Credit Reference Bureau (CRB) blacklists under plans mooted by President William Ruto to reform the country’s credit market.

The President has directed the Central Bank of Kenya (CBK) to abolish the blacklisting of borrowers and instead have a scoring method where defaulters will get a low grade instead of being shut out of the financial system.

President Ruto said the government supports the credit sharing mechanism but wants a system where borrowers can be graduated from the least to the best, which will then allow lenders to appropriately price their loans based on risk profile.

Borrowers reported to one of Kenya’s three credit bureaus have their chances of accessing new credit severely limited as lenders tend to shun them altogether when they apply for loans, in what is known as negative listing.

“I am very happy that between four and five million Kenyans will by the beginning of November be out of blacklisting,” the President said on Wednesday.

“That is very important because they have been excluded from any formal borrowing because of black listing and have been left at the mercy of shylocks and predatory lenders that exploit them and many Kenyan pay as much as 1000 percent.”

This is the second time the government is removing defaulters from CRB listing after mobile digital lenders were barred from blacklisting borrowers who default on loans of less than Sh1,000.

Data from the country’s three CRBs showed that borrowers who had defaulted on digital loans of less than Sh1,000 made up the bulk of 4.6 million borrowers blacklisted at the time.

The new administration is picking from retired President Uhuru Kenyatta’s playbook who last year stopped listing defaulters on loans of less than Sh5 million as a measure to cushion borrowers hit hard by Covid-19 economic shocks.

The CRBs are expected to resume these listings tomorrow when the moratorium is slated to end.

This was a second freeze on CRB listing after CBK first halted listing for six months in April 2020.

The new administration, which went round the country collecting opinions from Kenyans during the campaign period, says blacklisting at CRBs was one of the major concerns among Kenyans, alongside the cost of digital loans.

President Ruto lauded the move by Safaricom which cut the daily charges on the Fuliza overdraft facility for loans below Sh1000 by 50 percent and introduced a three-day grace period.

The small credit facility has emerged as a leading mobile loan, disbursing Sh1.5 billion daily.

Borrowings from Safaricom’s overdraft service rose by 30.7 percent in the six months to June this year to Sh288 billion up from Sh220.38 billion in the same period last year.

Daily charges on loans of up to Sh1000 will come down from Sh10 to Sh5, while those below Sh500 will now attract Sh3 daily charges down from Sh5.

Safaricom launched the Fuliza facility on January 5, 2019, in partnership with Commercial Bank of Africa (now merged into NCBA) and KCB Group.

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