On November 11, the Central Bank of Kenya (CBK) said Credit Reference Bureaus (CRBs) were exploiting unfavorable credit records to refuse borrowers loans.
Despite the 2010 Credit Information Sharing (CIS) framework changes, CBK noted that the lack of enforcement continued.
The first thing it did was tell credit bureaus (CRBs) to include a uniform disclaimer at the top of each report that said a borrower’s credit score shouldn’t be the deciding factor in whether or not to issue loans.
Banks will be expected to take into account a borrower’s credit score and other variables before making a lending decision, and CBK has said that it would work closely with banks to execute this risk-based credit valuation.
“Borrowers should get in touch with their loan servicers when they run into trouble making their repayments. They should also check their credit reports on a regular basis to monitor their credit scores and make sure the information is correct.” Disclosed by CBK.
The CBK said that this method would make it easier for businesses, particularly SMEs, to get loans at reasonable rates.
Each borrower whose credit information was supplied was required to have a credit score developed by the CRBs, with the procedures and methods for doing so outlined in the CBK’s 2020 Regulations.
A free credit report once a year is available to everyone, and we want to make sure people are aware of it. CBK. reaffirmed.
It also encouraged people to pay back their debts on time so they might improve their credit ratings and qualify for lower interest rates on future loans.
The CIS framework first targeted the expense of clearance checks required by citizens before employment, which was seen as an entrance barrier, and unregulated digital lenders and credit-only lenders utilizing CRB listing and other methods to harass borrowers.
It was thought that public blacklisting based on credit scores was a punitive instrument that prevented Kenyans from obtaining loans, rather than a tool that would allow borrowers to take use of their credit history to get better rates on loans.
Above 800 on Kenya’s credit scoring scale—which ranges from 300 to 900—indicates an individual is likely to make timely loan payments.
A low credit score (below 450) is indicative of a poor repayment history and may result in loan denial from many lending organizations.
In his inauguration address on September 13, 2022, President William Ruto advocated for the use of credit ratings to help guarantee that Kenyans are not unfairly refused loans.