•The temporary suspension of the listing with Credit Reference Bureaus is effective from April 1.
•According to financial analyst, Mihr Thakar delaying the listing of borrowers on CRB increases the level of noise encountered by banks during due diligence.
Banking sector experts are skeptical about the blanket lifting of CRB listings raising concerns that this may give serial defaulters a chance to default on more loans.
This follows President Uhuru Kenyatta directive on Wednesday for temporary suspension of the listing with Credit Reference Bureaus (CRB) of any person, Micro, Small and Medium Enterprises (MSMES) and corporate entities whose loan account fall overdue or is in arrears.
This is effective from April 1.
According to financial analyst, Mihr Thakar delaying the listing of borrowers on CRB makes it difficult for encountered by banks to conduct due diligence on new borrowers.
Thakar however said this could be mitigated for existing customers through examining payment history on past loans with the same institution.
Kenya Bankers Association Research and Policy Director Jared Osoro said that the immediate impact on the banks will be the cost of funding the loans.
“The lowering of the Central Bank Rate will not also translate to more lending as people are talking about rescheduling credit,” Osoro told the Star.
The CBR was lowered to 7.25 per cent for commercial banks to lower the interest rates to their borrowers.
He also added that non-performing loans are expected to increase substantially as under the current circumstances many people may end up defaulting.
According to CBK, the rate of non-performing loans has grown to 12.7 per cent as of February from 12 per cent in December.
Osoro recommended the change of status in the CRB to be monitored case by case due to serial defaulters.
According to John Ambetsa, General Manager Metropol Credit Reference Bureau, there will be a gap between banks, lenders and the bureau as they cannot share the negative information of borrowers.
This will, in turn, lead to less visibility for banks as they seek to establish risk when giving loans hence lead to overborrowing.