The Central Bank of Kenya (CBK) announces the rollout of a Credit Repair Framework by commercial banks, microfinance banks and mortgage finance companies, which will free at least 4.2 million Kenyans from negative listing by Credit Reference Bureaus (CRBs).
According to CBK, the framework seeks to improve the credit standing of mobile phone digital borrowers whose loans are non-performing and have been reported to CRBs. The limited Framework will expire on May 31, 2023.
Through the Framework, the institutions will provide a discount of at least fifty percent of the non-performing mobile phone digital loans outstanding as of October 2022, and update the borrower’s credit standing from non-performing to performing. The institution will then enter into a repayment plan with the borrowers for a period up to May 31, 2023, for the balance of the loan. Upon the expiry of the Framework, the credit standing of the borrowers with respect to these loans will depend on their repayment performance during the six-month period.
Number of borrowers benefiting from CBK’s framework
“The Framework will cover loans with a repayment period of 30 days or less and were offered by these institutions through mobile phones. It is anticipated that the Framework will enable over 4.2 million mobile phone digital borrowers, adversely listed with CRBs, to repair their credit standing. The total value is approximately Ksh30 billion, equivalent to 0.8 percent of the gross banking sector loan portfolio of Ksh3.6 trillion at end of October 2022,” CBK said.
Read: CBK Issues New Directives On CRB Listing
The borrowers covered in the Framework are mainly in the personal and micro enterprises sectors and were adversely impacted by the COVID-19 pandemic.
“CBK reminds the public to honour their payment obligations on their credit facilities when they fall due. This will enable them to build a good credit history based on their payment behaviour and thereby obtain loans at better rates. When borrowers experience challenges in repaying their loans, they should proactively engage their lenders,” CBK said.
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