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Kenya’s Central Bank Cushions Saccos Against Defaulters in New Regulations

Published

6 years ago

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Kenya has banned unregulated digital and credit-only lenders from the country’s credit information sharing (CIS), and introduced new rules that compels savings and credit societies (Saccos) to share credit information on their members with the credit reference bureaus to control rising bad debts in the sub-sector.

According to the Central Bank of Kenya (CBK), digital and credit only lenders will no longer submit credit information on their borrowers to Credit Reference Bureaus (CRBs).

“With immediate effect, CBK has withdrawn the approvals granted to unregulated digital (mobile-based) and credit-only lenders as third party credit information providers to CRBs,” the regulator said in a statement.

“The withdrawal is in response to numerous public complaints over misuse of the CIS by the unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints.”

In March, Kenyan Parliament considered a petition to launch investigations into the operations of digital money lending institutions over claims of exploitation of borrowers.

The new Credit Reference Bureau Regulations, gazetted by the central bank last week has also abolished CRB clearance certificate fees for first time applicants and set the minimum volume of non-performing loans (NPLs) that qualifies one to be listed with the CRB at Ksh1,000 ($10).

“Borrower’s information regarding nonperforming loans of less than Ksh1,000($10) will therefore not be submitted to CRBs, and borrowers that were previously “blacklisted” only for amounts less than Ksh1,000 will be delisted, according to CBK.