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Kenya

Digital lenders to set up real-time credit sharing system to tame defaulters

Mbowa says the Credit Information Sharing System (CISS) will help tame the culture of defaulting from one mobile lender to another/AFP

NAIROBI, Kenya, Jul 11- Twelve firms under the Digital Lenders Association of Kenya (DLAK) will have access to customers borrowing history if the real-time credit information system they are working on is implemented.

The Credit Information  System (CIS) is being sponsored by World Bank.

Tala East Africa Country Manager Ivan Mbowa says the Credit Information Sharing System (CISS) will help tame the culture of defaulting from one mobile lender to another.

“The real-time credit information system will help us see just how much indebted a customer is, and we hope other lenders to contribute the information,” he said.

His sentiments come against the backdrop of a study conducted by the Central Bank of Kenya (CBK) showing that 16.6 percent of digital borrowers take up a loan to pay for another, entangling them in a vicious cycle.

Mbowa says some firms in the Association have been withholding credit information about their clients who often proceed to secure loans from other lenders after defaulting with multiple others.

He further highlighted the failure by some lenders to submit information to the Credit Reference Bureau as a major impediment to tracking a customer borrowing history.

“From our finding, listings on CRB is not timely. This makes it difficult to track a customers’ lending habits since some borrow more than once or twice a month from different lenders,” Mbowa said.

Last week, CBK issued a circular directing all mobile loans to operate as normal loans where a customer will be considered to have defaulted after six months.

The directive also requires that all financial institutions must forward customers’ information to CRB every day to ensure that information is up to date and those who have resumed servicing their facilities are not listed as defaulters.

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Already, over 400,000 people have been blacklisted for defaulting on loans of Sh200 and below.

Last month Members of the Digital Lenders Association of Kenya generated a code of conduct aimed to regulate affiliates to the body.

Some of the rules under the new rules and regulations for DLAK members included consumers access to clear pricing, empowering them to make informed decisions on the loan product that best meets their needs.

Borrowers will also enjoy data privacy where digital lenders collect personal data only relevant to the services provided, and for which the borrower has given express permission.

The Digital Lenders Association of Kenya consists of 12 founding members including Tala, MyCredit, and Okolea among others.

 

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