Any lender who denies a borrower loans for being blacklisted with the Credit Reference Bureaus (CRB) will now pay a fine of up to 2 million shillings following a new regulation by the National Treasury.
The new regulations introduced by the National Treasury seek to bring sanity at the CRBs while as well enable Kenyans to borrow more at a time when the economy has been hit by the Coronavirus pandemic.
According to data, up to 2.5 million Kenyans have been denied loans by Banks and SACCOs because they have a negative credit score or have been listed with the CRBs.
“An institution that denies a customer a credit facility or any other financial service solely based on 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,” said Treasury CS Ukur Yattani.
The New regulations outline that lenders can only deny borrowers loans based on factors other than the credit score at the CRBs.
Kenya Bankers Association CEO Habil Olaka says “The score should not be a basis for you being denied; it should be a basis for banks to be able to price the risk.”
“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, ” Mr. Olaka adds.
The regulator, CBK, has also been working to ensure the listings at the CRBs are reducing with the new regulation affecting unregulated digital lenders.
The number of borrowers who were blacklisted at the CRBs increased to 3.2 million in March 2020 from 2.7 million the previous year with a good number listed by the digital lenders.
In an attempt to clean up the CRBs, CBK barred all unregulated digital lenders from listing borrowers who had defaulted payments. The regulator also suspended CRB listings from April 1, 2020, to cushion Kenyans against the adverse effects of Covid-19.