Central Bank of Kenya (CBK). FILE PHOTO | NMG Nearly a third or slightly more than one million borrowers will be removed from the country’s credit reference bureaus (CRBs) following the central bank’s order to spare defaulters with unpaid loans of less than Sh1,000.
The move will enhance the borrowers’ chances of being able to borrow more in the latest cleanup of the CRBs’ blacklist—which has about 3.2 million Kenyans that have been negatively listed.
Commercial banks, regulated digital lenders and saccos have been barred from listing defaulters who borrowed less than Sh1,000 or have been unable to clear balances that are less than the set amount.
Data from Kenya’s three CRBs — Metropol, TransUnion and Creditinfo International– show that the accounts that were negatively listed had jumped from 2.7 million last year, a significant number of them linked to mobile digital loans of less than Sh2,000
Metropol Managing Director Sam Omukoko said that the Central Bank of Kenya (CBK) is still working out on rules on whether those who were negatively listed for unpaid balances of less than Sh1,000 qualify to be removed from the blacklist.
“There are 5.1 million unique borrowers with balances below Sh1,000, out of which 1.06 million are negatively listed by MFIs (micro finance institutions) and fintechs,” Mr Omukoko said.
“We are still working with CBK and refining the numbers because some had borrowed say Sh10, 000, repaid a large portion of the loan only to get to Sh900 and failed to pay,” he said.
Non-performing loans in the banking industry rose to 12 percent last year, from 9.5 percent in 2017, CBK shows, remaining in double digits for the first time since 2007.
This has triggered property seizures by banks and an increase in the number of defaulters reported to CRBs, hurting the borrowers’ chances of being able to borrow more.
Majority of the negative listings were for borrowings tapped through mobile phones with the average loan owed by the defaulting digital borrowers at Sh2,500.
Kenya has witnessed a proliferation of digital lenders targeting the banked and unbanked alike, saddling borrowers with high-interest rates and leaving regulators scrambling to keep up.Market leader M-Shwari, Kenya’s first savings and loans product introduced by Safaricom and Commercial Bank of Africa in 2012, charges a “facilitation fee” of 7.5 percent on credit regardless of its duration.On a loan with a month’s term, this equates to an annualised interest rate of 91 percent. Unregulated lenders Tala and Branch, […]
