Kenya’s Central Bank to review credit rating system over ‘unfair blacklisting’

The Central Bank of Kenya has started reviewing the credit information sharing (CIS) system following increased complaints that reference bureaus are only concentrating on blacklisting of defaulters.

The licensing of credit reference bureaus (CRBs) by the CBK was expected to herald a regime in which customers would be given credit based on their repayment history.

He said that CRBs are smaller versions of rating agencies which compute credit scores based on the credit history of the borrowers. “They look at the probability or likelihood of default by a borrower and they compute a score. A borrower with a high likelihood of default will receive a lower score, while one with a lower likelihood of default will receive a higher score.”
According to Transunion CRB, the data used in its credit scoring model includes demographic information — age, amount owed, length of credit history, new debt, type of debt, and the number of credit enquires in the borrower’s profile.
Despite CBK imposing fines of up to $10,000 on commercial banks wrongfully blacklisting customers with CRBs, more Kenyans are still getting bad ratings.
“Banks are using the CIS mechanism positively and negatively. Customers believe it is being used as a blacklisting operation because they are not getting the benefits of good credit performance,” said CBK Governor Patrick Njoroge.
He added that the rationale of CIS should be to address the information asymmetry and enable banks to price credit risks more effectively.
“In our vision as CBK, customers’ credit history must amount to something. Good credit history should be rewarded through lower interest rates.

Kenya’s Central Bank to review credit rating system over ‘unfair blacklisting’

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