The Central Bank of Kenya (CBK) expects more borrowers to be freed from Credit Reference Bureau listings that currently stands at 19 million.
It said this will happen as lenders embrace its Credit Repair Framework announced last week.
There are currently three licensed Credit Reference Bureaus (CRBs) –CreditInfo CRB, Metropol CRB and Transunion Kenya CRB.
CBK said that currently, 12 million unique borrowers have a record of performing loans.
Those with Non-Performing-Loans total seven million (7 million borrowers) of which, 4.2 million are individuals who have borrowed from mobile phone digital lenders.
CBK governor Patrick Njoroge on Thursday said lenders have started implementing the framework, which will remain in place until May 31, next year.
“Banks and digital lenders have committed to the credit repair and have started reaching out to customers,” Njoroge said in his post Monetary Policy Committee (MPC) briefing on Thursday.
He said borrowers who have not been reached by lenders could as well reach out to initiate the process.
CBK announced the rollout of the Credit Repair Framework by commercial banks, microfinance banks and mortgage finance companies on November 14.
The Framework seeks to improve the credit standing of mobile phone digital borrowers whose loans are non-performing and have been reported as such to Credit Reference Bureaus (CRBs).
Through the framework, the institutions will provide a discount of at least 50 per cent of the non-performing mobile phone digital loans, outstanding as at end October 2022.
They will then update the borrowers credit standing from non-performing to performing, after which the institution will enter into a repayment plan with the borrowers for a period up to May 31, 2023, for the balance of the loan.
Upon expiry of the Framework, the credit standing of the borrowers with respect to these loans will depend on their repayment performance during the six-month period.
The Framework will cover loans with a repayment period of 30 days or less and were offered by these institutions through mobile phones.
It is anticipated that the framework will enable over 4.2 million mobile phone digital borrowers, adversely listed with CRBs, to repair their credit standing.
The total value is approximately Sh30 billion, equivalent to 0.8 percent of the gross banking sector loan portfolio of Sh3.6 trillion at end October 2022.
According to CBK, borrowers covered in the Framework are mainly in the personal and micro-enterprises sectors and were adversely impacted by the Covid-19 pandemic.
Their lives and livelihoods were severely impacted by the pandemic through inter-alia loss of employment and closure of their micro-enterprises,” CBK notes last week.
The Framework is expected to enable this segment of borrowers to access credit and other financial services as they rebuild their lives and livelihoods.
"CBK reminds the public to honour their payment obligations on their credit facilities when they fall due. This will enable them to build a good credit history based on their payment behaviour and thereby obtain loans at better rates,” Njoroge said.
Meanwhile, the CBK governor has urged lenders to widen their scope on their lending decisions beyond the customers credit score.
“We should ensure that the credit score is not the only thing used to determine access to credit,” Njoroge said as the sector take up the risk-based pricing on loan interests.
