Kenyan banks share credit details

August 12, 2010

, NAIROBI, Kenya Aug 12- The Kenya Bankers Association (KBA) has reported impressive compliance by commercial banks in the implementation of customer credit information sharing.

The exercise, which kicked off officially at the end of July, requires banks to submit information on customers’ loans to the Credit Reference Bureau for the formulation of individual credit reports.

KBA Credit Information Sharing Initiative Project Manager Jared Getenga said on Thursday that the response highlighted banks’ willingness to ensure the cost of credit comes down in the country.

“The reports that we are getting is that banks by and large have met the deadline. I think that has been because there have been concerted efforts by them to put together the data,” Mr Getenga said.

The Central Bank is expected to release an official update on the exercise in the coming days.

Financial institutions are required to submit monthly updates by the tenth day of each month, following the enactment of the Banking (Credit Reference Bureau) Regulations 2008, in February and the subsequent licensing of the first credit reference bureau, CRB Africa.

KBA Executive Director John Wanyela said the credit reports would help solve the existing information asymmetry between banks and borrowers that has been said to constrain access to credit.

CBK has awarded an interim license to Metropol East Africa making it the country’s second credit reference bureau and is currently processing applications from Compuscan and Credit Check.

Mr Wanyela said this would speed up the sharing of credit information within the banking sector cutting down the transaction time for securing loans.

Banks are expected to use this information to price loans based on a borrower’s risk profile thus easily isolating serial loan defaulters.

On the other hand, borrowers particularly those in the Small and Medium Enterprise Sector, will find it easier to access credit as the information will act as ‘personal collateral’ when applying for loans.

The banking industry has been challenged with high rates of bad debts as a result of poor lending practices, but access to individual credit histories is expected to curtail the practice.

Credit Reference Bureau Africa Chief Executive Officer Wachira Ndege however said more work has to be done to synergise bank-reporting platforms.

“We are dealing with many institutions with different systems. There are also data fields for customers that are missing that the banks now have to go back and fill,” Mr Ndege said.

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