By JAMES ANYANZWA

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“With immediate effect, CBK has withdrawn the approvals granted to unregulated digital (mobile-based) and credit-only lenders as third party credit information providers to CRBs,” the regulator said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

Although Saccos have been submitting credit information on their borrowers to CRBs, they have been doing it on a voluntary basis.

According to CBK the new regulations which replaces Credit Reference Bureau regulations (2013) seek to enhance consumer protection for borrowers and expand the sources of information and ensure the sustainability of CIS as a key tool to bridge the information gap about the borrower’s creditworthiness.

CRBs were first introduced in Kenya in the 90’s following collapse of banks, fuelled in great part by a sharp increase in non-performing loans as the proportion of bad loans grew by an average of 16.5 per cent between 1996 and 1999.

However, formal licensing of CRBs only commenced in 2010.

Since then, Kenya, has licensed three bureaus—CRB Africa, Metropol CRB Ltd and Creditinfo.

CRB regulations places a mandatory requirement on CBK licensed institutions to submit data to three licensed CRBs.

Later, these regulations were expanded to include the participation of non-banks. But most non-banks only participate in the CIS mechanism to offload negative credit information, according to the National Treasury’s Draft Credit Information Sharing (CIS) policy dated September 2019.

According to the National Treasury Kenya’s CIS regulatory landscape is fragmented with much emphasis placed on institutions licensed by the CBK while the overall parameters of “voluntary” versus “mandatory” data submission is unequal.