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Credit bureaus effective in 2009

NAIROBI, September 22- Acting Finance Ministers John Michuki says a law to establish and operationalise the Credit Reference Bureaus (CRBs) is expected to come into effect on February 1, 2009.

The proposal came from a taskforce that consisted of members from the Kenya Bankers Association (KBA) and the Central Bank of Kenya (CBK).

“I therefore urge the Central Bank and the KBA to ensure that all the prerequisite operational modalities are in place and extensive public sensitisation and awareness carried out by this date,” Mr Michuki directed.

Upon its enactment, the law will give the Central Bank the power to licence and supervise credit bureaus, which will be required to collate credit information on banks’ customers.  The regulations will also facilitate credit information sharing among all credit providers licensed under the Banking Act.

This development is expected to curtail the number of serial defaulters who borrow money from various institutions with no intention of repaying and thus lead to the reduction of non-performing loans and will allow banks to price loans based on a borrower’s risk profile.

Under the law, the information held by the bureau remains the property of the Central Bank of Kenya and they (bureaus) are required to furnish the CBK with periodic reports of their business operations.

“A bureau which fails to comply (with the regulations) or furnishes the Central Bank of Kenya with an incomplete, inadequate or late return shall be liable to a penalty of Sh500, 000,” a Kenya Gazette supplement states.

Speaking during the launch of the regulations, Mr Michuki lauded the credit referencing system saying its enactment would facilitate access to competitive and affordable credit.

He noted that individuals would be able to build a history of their creditworthiness, which would act as ‘personal collateral’ when applying for loans.

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“Indeed, the growth of our economy and the realisation of Vision 2030 largely depend on the success of our small and medium enterprises,” he observed.

He added that the government would continue to formulate the appropriate legal and regulatory framework to extend credit referencing beyond the banking sector.

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