According to Business Daily Africa, and under new rules created to rate the ability of establishments to repay debts, directors and key shareholders of companies who default on commercial loans they take, will be submitted to Credit Reference Bureaus (CRBs).
A new arrangement which will be filled by lenders, intends to link the directors, main shareholders, partners and trustees of corporate borrowers in order to conduct due diligence on companies and also establish the identity of owners.
Individuals who hold at least 10 percent stake in a company seeking loans will also be listed on Credit Reference Bureaus (CRBs) along with the directors, partners, trustees and officials of the firms.
The new requirement is as a result of multiple credit defaults by companies.
Revealing the identities of the directors, partners, trustees and officials of the firms, will effectively lift the cloak of incorporation which in the past, has been applied over time to separate ownership of limited companies from their liabilities and day to day management.
The Chief Executive of the industry lobby Credit Information Sharing Association of Kenya.; Jared Getenga stated that, “In the case of non-natural persons like companies, the information of the directors is shared to the bureau so that the lenders can know the level of indirect exposure they have.”
Consolidated Bank, Athi River Mining, Nakumatt as well as Real People and Uchumi, are some of the most recent defaulters of billions of Kenyan Shillings in bank loans and corporate bonds. Real People and Uchumi, are reportedly looking to renegotiate their loans.
In addition, the new Credit Reference Bureaus (CRBs) arrangement, will also connect borrowing details with employment records which will in turn enable lenders to get a clearer picture of borrowers.
The Central Bank Of Kenya (CBK) states that it is necessary to connect individuals to their accounts held by different credit providers using various identifying features, such as name, national identification number, address, tax identification number, and employer information, in order to develop a more comprehensive profile of an individual’s credit risk profile.
The employment data will in turn be used for risk assessment and for matching and establishing identity.
The type of employment as well as the gross monthly income, will assist in establishing a borrower’s ability to afford a loan.
Mr. Jared Getenga made it known that, “The law is clear on what should be shared with the CRB; that is a customer’s identification details, their credit status, their securities and details of payment of credit facilities. Employment information and income are shared to assist the lender to determine the ability of the borrower to repay the facility.”
The Central Bank Of Kenya (CBK) in a circular released in May 2019, ordered banks, microfinance and credit bureaus to apply the new template adding that it will include daily updates of information as it requires the submission of data to be made by midnight every day.
These submissions will be regarding transactions which have occurred during that day, in addition to any demographic data and credit information rectifications.
