The Central Bank of Kenya (CBK) has prohibited 624 digital loan providers and credit-only providers from sharing any and all information on loan payments and defaults from last year, with any of the Credit Reference Bureaus (CRBs). The decision is seen as a direct result of numerous complaints made by users.
According to recent Data the East African nation of Kenya had 1,994 3rd data providers who were allowed to share the loan payments and loan defaults of borrowers, with the Credit Reference Bureaus (CRBs). This is a 23.8 percent decline from the 2,618 companies which were licensed in the previous year.
The Central Bank of Kenya (CBK) which is the banking regulator believes the decline is as a result of the ban which came after numerous complaints were issued by users over the significant misuse of the Credit Information Sharing (CIS) mechanism.
All Credit Reference Bureaus (CRBs) are allowed to contact third parties for information on loan defaults as well as loan payments so as to share that information to Savings and Credit Co-Operative Society (SACCOS), microfinance institutions, and banks. These third parties include digital loan providers.
The Central Bank of Kenya (CBK) made it known through its Supervision Annual Report 2020 that, “The decline in numbers follows CBK withdrawal on April 14, 2020 of 491 approvals granted to unregulated digital (mobile-based) and credit-only lenders as third-party credit information providers to CRBs.”
The decision by the Central Bank of Kenya (CBK) is coming at a time when defaults on loans have increased and also led to an increase in risks as a result of declines in company revenues, salary reductions and numerous layoffs brought on by the still ongoing Coronavirus pandemic.
In 2020 the Central Bank of Kenya (CBK), stopped the loan listing by Credit Reference Bureaus (CRBs) in Kenya for individuals who defaulted on their loans from the 1st of April 2020. The measure carried on until the 30th of September 2020 and was aimed at providing relief to those who received said loans and were unable to pay in time due to the economic strains brought on by the Coronavirus pandemic as the number of unpaid loans increased to the highest level ever experienced since August 2007.
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