NAIROBI, Kenya, Apr 13 – The newly licensed Credit Reference Bureau Africa (CRB Africa) is now proposing an amendment to the law to allow for the collection of all information relating to a borrower’s credit history.
CRB Africa Group Chief Executive Wachira Ndege said on Tuesday that this would enable borrowers with good credit histories to negotiate for better interest rates from their banks.
Currently the law only requires banks to report loan defaulters with the reference bureau.
“What is happening right now is banks will see that you have a default but will have no idea how good your credit repayment history has been and will treat you like a normal risk,” Mr Ndege said and revealed that there was a drive within the industry to have the proposal integrated via a Customer Consent Clause that would allow banks to share the information.
“We expect that by July banks that have done this (implemented the clause) will be able to share the information with the bureau,” he said.
The greatest fear amongst banks has been that their competitors would use the same information to approach their clients.
Two months after being licensed as the first credit reference bureau in Kenya, Mr Ndege said CRB Africa had received close to 100 percent compliance from banks in the compiling of a credit information-sharing platform.
This he believes will play a significant role in making credit more affordable and accessible to Kenyans. At the same time, CRB Africa intends to roll out the information-sharing platform in July.
The process will see banks standardise data reporting formats. Quality and reliable credit information is expected to improve the speed of risk assessment and reduce the related lending costs.
Credit terms, especially for unsecured loans, have remained high because of the default rate and it is expected that the bureau will make it easier for creditworthy individuals to negotiate for personal terms.
Credit reference bureaus are also expected to help banks drop the use of collateralised physical assets whose values have at times been questionable after default.
Data from Central Bank of Kenya shows that non-performing loans as a proportion of total loans fell to 2.67 percent in February from 2.93 percent in January this year, comparing favorably to the 30 percent levels attained in the 1990s.