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Saturday, November 12, 2022 – The Central Bank of Kenya (CBK) has changed the laws on Credit Reference Bureaus (CRBS) that were barring Kenyans from taking up loans.
In a statement, CBK Governor Patrick Njoroge stated that CRBs were using adverse credit reports, viewed by the general public as tools to deny borrowers’ credit.
CBK highlighted that the circumvention was ongoing despite improvements to the Credit Information Sharing (CIS) framework launched in 2010.
First, CBK directed CRBs to include a standard statement at the top of every credit report indicating that a customer’s credit score should not be used as the main reason a lender should deny a customer a loan.
Further, CBK added that it would work closely with banks in implementing risk-based credit pricing, where banks will be required to consider a borrower’s credit score and other factors before making a lending decision.
CBK claimed the approach would allow borrowers, especially micro, small and medium-sized enterprises (MSMEs), to access appropriately priced credit.
The 2020 Regulations provided that CRBs must develop a credit score for each borrower whose credit information was submitted and that the score had to be computed using details and methods prescribed by the CBK.
It also urged citizens to honour payment obligations on their credit facilities to enable them to build a good credit history, thereby obtaining loans at better rates.
Blacklisting members of the public based on their credit scores was viewed as a punitive tool that barred Kenyans from getting loans instead of helping borrowers take advantage of their credit history to get better pricing of loans.
In Kenya, a credit score rating begins from 0-900 and is considered a good score when above 800, reflecting that one can pay their loan promptly.
A score rating between 0-450, is an indicator of a bad score rating, a reason that may lead financial institutions declining to offer you loans, because of a bad repayment history.
During his inaugural speech on September 13, 2022, Ruto backed the assigning of credit scores to borrowers in a push to allow CRBs to ensure that Kenyans are not denied credit.
The Kenyan DAILY POST.