“The law has been amended to allow microfinance institutions to share credit information, but the regulations have not been finalised,” said Jared Ketenga, project manager at the Kenya Credit Information Sharing Initiative.
“ We are concentrating on commercial banks, but in a short while, we expect to launch the mechanism for micro-finance institutions,” added Ketenga.
“In August we intend to launch a pilot project for the MFIs. It is a testing process to see how their systems can link with Credit Bureaus.”
Credit information sharing facilitates the building of information capital that guides the pricing of loans by financial institutions.
Credit Reference Bureaus (CRBs), which gather and store information on borrowers’ credit history, seek to help commercial banks tighten their lending guidelines with a view of controlling the level of non-performing loans (NPLs).
Huge provisions for NPLs have previously eroded banks bottom-line and stoked their financial mystery in harsh operating environment.
CRBs are expected to be pertinent to borrowers in the informal and small and medium enterprises that have a good track record and performance, to use their reputational capital to access credit.
According to the Central Bank of Kenya (CBK) latest data, the ratio of non-performing loans to gross loans improved from 6.3 per cent registered in December 2010 to 4.4 per cent in December, last year.
The reduction in credit risk is largely attributable to enhanced appraisal standards deployed by banks.