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Loan defaulters spared blacklisting at the CRBs

Habil Olaka
KBA chief executive Habil Olaka welcomed the move as necessary under the prevailing circumstances. FILE PHOTO | NMG 

Distressed borrowers who fail to service loans due from April 1 will be spared blacklisting in a temporary relief aimed at cushioning them from the impact of the coronavirus pandemic.

President Uhuru Kenyatta Wednesday proposed temporary suspension of the law requiring loan defaulters to be listed with the country’s three licensed credit reference bureaus (CRBs)— Metropol, TransUnion and Creditinfo International.

The move, subject to approval by the National Assembly, is part of fiscal measures announced by Mr Kenyatta to cushion Kenyans from the debilitating economic effects of the measures taken to contain the spread of the virus.

The reprieve will apply to all borrowers, including households, SMEs and companies.

The move means families and businesses which fail to honour loan servicing obligations as a result of the Covid-19 pandemic will not be included in the blacklist of defaulters, making them eligible to qualify for loans in future without clearance from the CRBs.

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The CRB clearance costs Sh2,000.

Mr Kenyatta did not, however, clarify whether or not the distressed borrowers will also be spared late payment fees levied by lenders.

“The Central Bank of Kenya [CBK] shall provide flexibility to banks with regards to requirements for loan classifications and provisioning for loans that were performing as at March 2, 2020 and whose repayment period was extended or restructured due to this pandemic,” Mr Kenyatta said in televised address.

Kenya Bankers Association (KBA) chief executive Habil Olaka welcomed the move as necessary under the prevailing circumstances.

“There have been a number of bold moves that have been made which I think are in the right direction. It just shows the whole machinery of the government has been unleashed to ensure that nothing is left undone,” Mr Olaka said.

CBK data shows banks and microfinance institutions requested 12.40 million credit status reports from the CRBs in 2018, a growth of 181.1 percent from 4.38 million reports in 2017, driven by increased uptake of mobile loans.

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