If you are in default of a loan that is less than Kes5 million your bank will not forward your details to credit reference bureaus before September next year.
The move, which is part of the government’s latest measures to cushion borrowers from adverse effects of Covid-19 was announced by President Uhuru Kenyatta during Mashujaa Day fete.
The suspension of listing with CRBs will, however, only be effected on loans that fell in default as at October, last year.
“The relevant authorities will, for loans less than Kes5 million, effect a moratorium of listing in CRBs for a period of 12 months to end September 2022,” Mr Kenyatta said yesterday.
Central Bank of Kenya commercial banks’ credit survey for the second quarter shows gross non-performing loans ratio swelled to 14 per cent by June compared to 13.1 per cent during a similar period in 2020.
The study identified that borrowers of personal and household, real estate, tourism, and trade loans as some of the worst affected, subsequently worsening the banking sector’s asset quality.
The President’s directive will see banks, saccos and microfinance lenders that have been sharing negative credit details of borrowers since June cease with immediate effect.
In April last year, Kenya directed lenders to freeze the sharing of borrowers’ negative credit information for six months as it stepped up efforts to cushion Kenyans from economic fallout of the pandemic.
On the lapse of the window period in October, lenders gave borrowers three months to resume loan repayments lest they get blacklisted.
Data from Kenya’s three CRBs—Metropol, TransUnion and Creditinfo International—shows that there were 14 million loan accounts negatively listed with the institutions as at January, this year, up from about 9.7 million accounts in August 2020.
According to CBK, uptake of loans in Kenya in the three months to June increased by 6.9 per cent to Kes3.1 trillion from Kes2.9 trillion in relation to the same month last year signaling improving business climate.
The regulator expects credit risk to keep declining as evidenced by the commercial banks’ reduced loan loss provisioning due to improving business climate.
CBK notes that increased profits in the sector are expected to continue but may face risks such as cybersecurity threats owing to the lenders’ adoption of digital banking systems.
Further, the discovery of new Covid-19 strains leading to a hit on economic activity as well as rising political temperatures in the run up to the 2022 General Election poses risk to the sector growth prospects.