High cost of credit has constrained the expansion of businesses and deterred access to credit by a significant proportion of locals.
CRBs were introduced following efforts between CBK and commercial banks in 2009, after the Banking (CRB) Regulations, 2008 became operational on February 2, 2009.
Kenya has two licensed credit reference bureaus, Metropol and Credit Reference Bureau (CRB) Africa Limited The banking sector was in the 1980s and 1990s saddled with a momentous NPLs portfolio invariably leading to the collapse of some banks.
Loan defaulters thrived in the “information asymmetry” environment that prevailed due to lack of a credit information sharing mechanism.
The development of a sustainable information sharing industry is recognised as a key component of financial sector reforms.
Credit history not only provide necessary input for credit underwriting, but also allow borrowers to take their credit history from one financial institution to another, thereby making lending markets more competitive and, in the end, more affordable.
Commercial banks are also working on a new legal framework that will enforce the sharing of positive information on borrowers’ credit status.
This has been made possible through an amendment to the CBK Act.
Mr Habil Olaka, the chief executive Kenya bankers Association, the industry’s umbrella body said the banking industry is keen to begin sharing positive data as soon as the legal framework is put in place.
“The CBK is preparing relevant regulations to be issued very soon,” said Olaka. The move is part of attempts to ward off negative public perceptions paint that CRBs as institutions seeking to shame and blacklist loan defaulters.
Although CRB regulations mandate the sharing of both negative information on non-performing loans as well as positive information on borrowers commercial banks have tended to focus on the former.