Lenders given green light to list loan defaulters at CRBs

Banks given approval to blacklist rogue borrowers at CRBs
CBK Governor Patrick Njoroge. PHOTO/COURTESY

Local banks have been given approval by the Central Bank of Kenya (CBK) to list loan defaulters at Credit Reference Bureaus (CRBs) following the expiry of a six month waiver period on Wednesday.

On April 14, 2020, the Central Bank of Kenya (CBK) announced the suspension, for a period of six months, of the listing of negative credit information with credit reference bureaus (CRBs) for borrowers whose loans were performing previously and had become non-performing after April 1, 2020. The announcement was part of a stimulus package issued by the regime meant to protect locals and businesses from the economic effects of the Covid-19 virus.

The suspension did not apply to loans that were non-performing before April 1, for which the regular procedures continued to apply. The six-month suspension ended on September 30, 2020, following which the existing procedures for risk classification of loans with respect to their performance and subsequent listing with CRBs would apply.

Specifically, financial institutions will from October 1, 2020, assess the performance of all loans that were performing before April 1. For those loans that went into arrears after that date, the period for determining their performance begins on October 1, 2020.

“If a loan is in arrears after 60 days from October 1, a financial institution will, in accordance with the existing procedures, give the borrowers notice of the intention to list them with the CRBs. If the loan has not been regularized after the 30-day notice period, the financial institution will then list the non-performing loan with the CRBs,” the Central Bank of Kenya said in a statement.

Consequently, the CBK added that borrowers whose loans were performing before April 1 and subsequently went into arrears, will have three months (up to the end December 2020) in accordance with existing procedures to regularize their loans before they are blacklisted at Kenya’s three CRBs – Metropol, TransUnion and Creditinfo International.

According to the CBK, approximately 3.2 million Kenyans were listed as loan defaulters in various CRB’s prior to the Covid-19 pandemic outbreak. The pandemic has so far led to numerous pay cuts and job losses in the country’s labour market leaving numerous Kenyans debt-ridden. To that effect, the number of loan defaulters has increased significantly fueled mostly by the availability of numerous digital borrowing platforms in the country that take advantage of gullible Kenyans by charging exorbitant interest rates.

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