By JAMES ANYANZWA
NAIROBI, KENYA: If you fail to pay your water, electricity or telephone bills, you will find it very difficult to borrow money from any financial institution.
This follows a plan to have Credit Reference Bureaus (CRBs) blacklist individuals and companies who default on utility payments.
Mr Sam Omukoko, the managing director of Metropol CRB, said such defaulters would have their credit rating and risk affected, which could see them shunned by commercial banks, Saccos and microfinance institutions.
“We are now working to expand the credit information sharing system to include utility companies. What this means is that we shall now be able to collect and store credit information on the consumers of these utilities.
“I think this initiative could also benefit these utility companies in terms of debt recovery and in ensuring their customers meet their financial obligations promptly,” Mr Omukoko told Business Beat.
CRBs were introduced in 2009 to gather, disseminate and store information on borrowers’ credit history — within a provided regulatory framework — to help financial institutions tighten their lending guidelines and control the level of non-performing loans (NPLs).
Huge provisions for NPLs have previously eroded banks’ bottom lines and made a harsh operating environment even harder to navigate.
So far, Omukoko said between 500,000 and 600,000 borrowers have been listed as “bad borrowers”, with the majority of them being commercial bank borrowers and university graduates who have defaulted on repayments of loans from the Higher Education Loans Board (Helb).
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However, following the introduction of a new legal framework that enforced the sharing of positive information on borrowers’ credit status in February, Omukoko said 3.2 million account holders have been listed as “good borrowers”, which means they can benefit from improved lending terms and conditions.
The move was in line with efforts to ward off negative public perceptions around CRBs, which had begun to be viewed as institutions out to shame defaulters.
The Central Bank of Kenya has so far registered two CRBs — CRB Africa and Metropol CRB.
According to the Kenya Bankers Association, the industry’s umbrella body, the intention of listing debtors in CRBs is not to blacklist them — such borrowers can still get access to credit, but only after stricter scrutiny and possibly more stringent repayment terms.
According to CRB regulations, bad borrowers will not be allowed to access credit from any financial institution for at least seven years from the time they complete their last loan repayment instalment.
CBK has projected an increase in the level of NPLs in commercial banks during the first three months of this year. This is due to regulations banning night travel for passenger service vehicles and the cyclical reduction of customers’ disposable income as a result of increased spending during the December/January festivities.
According to CBK’s prudential guidelines, a loan is declared non-performing when the principal or interest is due but goes unpaid for 90 days or more, or when interest payments for 90 days or more have been re-financed or rolled over into a new loan.