The Central Bank of Kenya has hinted at the possibility of reviewing the regulations on credit information sharing to make them more customer friendly.
CBK governor Patrick Njoroge said the review of the Credit Reference Bureau Regulations is important to reinforce consumer confidence.
Many bank customers have often complained of unfair treatment by banks and even mobile money service operators because of the punitive side effects of defaulting even on small mobile-based credit facilities. For instance, a borrower who defaults remains on the blacklist for five years even after his/her name is cleared after they pay.
“Consumers view CRB as a blacklist, this is not a positive thing for me as a consumer and that’s a problem, it has to be positive,” CBK governor Patrick Njoroge said last week.
The CBK boss regretted that while the laws were also meant to see good borrowers with impressive credit record getting loans at more affordable rates, this has not happened.
The governor said financial institutions should introduce better pricing mechanisms from the perspective of the rate they give a consumer in relation to their personal risk and the risk of the project they intend to undertake.
Njoroge, who was spoke during a press conference on Wednesday, noted that the review is for consumers benefit and will assist in having market determined interest rates and deepen engagements with consumers.
Kenya Bankers Association welcomed the suggested review of the credit reference bureau regulations and asked banks to leverage on the recently introduced credit information sharing framework to get better at using credit scores to price loans in order to reduce reliance on physical collateral.
“The ‘blacklist’ perception of credit reports was because the initial legal framework only provided for the sharing of data on non-performing loans. We were able to amend the law to enable full-file information sharing,” the association’s chief executive Habil Olaka told the Star.
The credit information sharing framework gives the industry’s wide visibility of both performing and non-performing loan information as it proceeds towards comprehensive information sharing that includes utilities and non-bank credit providers.
At the same time, the governor indicated his desire to see the Banking Amendment Act 2016 repealed due to the negative effects it has had on the economy.
However, last week, members of parliament from across the political divide rejected the governor’s call arguing they will not allow banks to take advantage of customers.
“Banks should not be addicted to the super profit they used to get before this law; they are still making profits higher than other companies listed in the Nairobi Stock Exchange,” Kiambu Member of Parliament Jude Njomo said.