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Thursday, September 24, 2020

Banks to pay Sh. 2 million fine for every CRB-listed Kenyan they deny loan

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CRB Latest News: Kenyan banks, microfinance institutions and saccos will pay up to Sh. 2 million for every borrower they deny a loan because of CRB listing. This is according to new regulation by the National Treasury.

According to a report that appeared in the Business Daily on Monday, the National Treasury has introduced the fine in a set of regulations that are aimed at cleaning up the CRBs blacklist and enhancing borrowers’ chances of being able to borrow more.

“Lenders can only reject a loan application due to other factors beyond credit scores earned via CRB listing. They will be expected to inform borrowers by writing about the reasons behind the rejection of their loan application,” says the report. It also quotes the National Treasury cabinet secretary Ukur Yatani as saying in the new CRB regulations:

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“An institution that denies a customer a credit facility or any other financial service solely on the basis of a credit score shall be liable to a monetary penalty of two million shillings or such other sanctions under the Act, the Microfinance Act, 2006, or the Sacco Societies Act, 2008, as the Central Bank may impose.”

Additionally, Habil Olaka, CEO of Kenya Bankers Association, was quoted saying that the CRB score should not be a basis for denying Kenyans loans. “It should be a basis for banks to be able to price the risk,” he said. “People have been denied a credit facility for being listed with CRBs, which is the kind of abuse they are trying to address. That is why the unregulated digital lenders have been kicked out.”

These regulations come in the wake of a clean up that saw the Central Bank of Kenya ban mobile lenders in the country from forwarding defaulters to the CRB.

In April this year, it was revealed that the number of Kenyans listed on credit reference bureaus has hit 3.2 million. This was a jump from the 2.7 million Kenyans who were listed in the CRB last year.

The listing in the CRB represented a 12 per cent rise in non-performing loans in Kenya up from 9.5 per cent in the year 2017.

Of the 2.7 million who were listed in the CRB in 2017, more than 400,000 people have been blacklisted for defaulting on loans of Sh. 200 and below. 16.6 per cent of digital borrowers take up one loan to pay another, ensnaring them in a vicious cycle. CRB Latest News.

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