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More creditors seek to share bad debtors’ details

Prof Njuguna Ndung’u, the Central Bank of Kenya governor. Data from CBK shows that banks have requested 4.8 million reports since referencing was introduced in 2010. PHOTO | DIANA NGILA
Prof Njuguna Ndung’u, the Central Bank of Kenya governor. Data from CBK shows that banks have requested 4.8 million reports since referencing was introduced in 2010. PHOTO | DIANA NGILA 

Non-deposit taking micro-finance institutions will start sharing information with credit bureaus if an umbrella body of lenders has its way.

Currently, credit-only financiers are not mandated to share information on how members service loans with other institutions without the consent of the borrowers.

This has proved difficult for micro-lenders, with defaulters refusing to give consent for sharing information which could see them blacklisted by the entire lending system.

Association of Kenya Credit Providers (AKCP), a lobby, has now forwarded recommendations to have all lenders (regulated and non-regulated) share information with the credit bureaus.

Credit only micro-finance institutions are not regulated as they do not take deposits from the public. They are registered by the Treasury.

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Two micro-lenders have successfully piloted information sharing with two others currently undergoing a pilot process.

“The other opportunity we are looking at is whether Central Bank of Kenya (CBK) can approve their participation like it has done for others such as Helb This will be a faster route,” said AKCP chief executive Jared Getenga.

The institutions mainly lend to small businesses and individuals looking for quick cash. Education and health are the main reasons cited by most people who borrow from the micro-lenders, shows data from the Association of Micro-finance Institutions (AMFI).

Some of the popular non-deposit taking lenders include Centum-owned Platinum Credit, World Vision’s Kadet, Eclof Kenya, Musoni, Pawdep and AAR Credit Services.

There are over 50 registered non-deposit taking lenders. Twenty one micro-lenders had loaned out Sh6.6 billion as at end of 2012, according to the latest AMFI annual report.

AMFI is also lobbying for the opening of a credit bureau to handle needs of non-deposit taking institutions. The report states that “the proposal is currently in the development phase”.

The institutions have to price their loans highly, usually a flat rate, as they do not have the comfort of an asset security.

Lenders expect a reduction in interest rates as bad borrowers are flushed out of the system. Loyal borrowers are expected to use their good history to bargain for lower rates and softer loan conditions.

Saccos are also pushing to share information with other credit providers. Mr Getenga said that the association had hired consultants to assess the ability of the saccos to share information. Deposit-taking micro-finance institutions are currently allowed to share information.

Inquiring from the bureaus has become a major step in loan appraisal by lending institutions, with data from CBK showing that banks have requested 4.8 million reports since referencing was introduced in 2010.

“This (optimisation of credit information sharing) is only possible when an encompassing regulatory framework for all credit providers, both regulated and non-regulated, is developed,” said CBK governor Njuguna Ndung’u.

Those with bad repayment histories are being forced to pay outstanding balances to institutions that blacklisted them before getting a loan from other lenders.

Public appointees are also being asked to provide proof that they have not been blacklisted by the bureaus, a move that has resulted in lenders recovering previous bad loans.

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