Financial market players push for reforms to cut cost of loans

Financial sector players have called for credit information sharing reforms to improve loan pricing and transparency.

They said last week that the proposed reforms should include establishment of strong credit reporting systems, collateral registries, legal structures and a regulatory framework.

They spoke when they attended the fifth Africa Credit Information Sharing (CIS) conference in Nairobi.

CIS Kenya chief executive Jared Gatenga said current challenges include high cost of credit and bankruptcy. This, he said, has been mostly due to the mushrooming of online money lenders.

“A strong credit infrastructure will enable efficient and effective access to credit, financial stability, secure transaction and debt resolution,” said Mr Gatenga.

CIS chairman Charles Ringera said the role of the credit reference bureau (CRB) was not to blacklist people but to come up with a credit score for everyone and make it cheaper for loan repayment.

“The credit score is useful to institutions such as banks to determine what the lending institutions can give in credit,” said Mr Ringera.

He noted that through the proposed reforms, collateral registry will be automated and will fasten the way lenders access information reducing the cost of credit.

The reforms push comes after Kenyans many found themselves in bad books with online lenders after they forwarded their details to CRB for loan defaulting.

Central Bank of Kenya Deputy Governor Sheila M’Mbijjewe said there should be a stable and inclusive financial sector for economic development of a country.

“There is need to have sound financial systems that build and connect savings to investments. This will create opportunities for scaling up financial inclusion through ease of credit access and resolution of debt,” said Ms M’Mbijjewe.

World Bank Group Lead Financial Sector specialist Luz Maria Salamina called on the banking institutions to embrace digital changes which also call for ethical banking.