Relief to borrowers and loan defaulters as President Uhuru announces the suspension of CRB listings till September 2022
Borrowers who fail on loans of less than Sh5 million will not be blacklisted at credit reference bureaus (CRBs), while those who are already banned would be dismissed in an effort to help companies recover from the effects of Covid-19.
President Uhuru Kenyatta announced on Wednesday the suspension of CRB listing for loans that went into default in October of last year, with the reprieve from blacklisting lasting until September of next year.
The CRB listing relief is part of a stimulus package designed to help troubled companies and families recover from the impact of the Covid-19 epidemic, which has reduced consumer demand and driven firms to lay off workers and scale back operations.
Borrowers who have been reported to one of Kenya’s three credit bureaus jeopardise their ability to borrow further.
“The relevant authorities will, for loans less than Sh5 million, effect a moratorium of listing in CRBs for a period of 12 months to end September 2022,” President Kenyatta said yesterday.
Mr Kenyatta’s directive puts a stop to banks, SACCOs, and microfinance businesses, which have been allowed to resume the unfettered transmission of negative credit information to the three CRBs since June.
The ban is the second since Kenya reported the first incidence of the Covid-19 illness last year, as the government works to save people and companies from losing credit.
CBK suspended CRB listings for six months in April of last year as part of the efforts to help borrowers affected by the epidemic.
The ban expired in October, enabling financial institutions to begin submitting defaulters’ names to the bureaus. Lenders, on the other hand, gave defaulters 90 days beginning October 1 to begin repaying their debts or be listed with CRBs.
The suspension of negative listing on Kenya’s three credit reporting bureaus — Metropol, TransUnion, and Creditinfo International — was intended to help troubled borrowers cope with the impacts of the coronavirus epidemic.
Workers who took out unsecured loans on the strength of their earnings to buy items like as furniture and automobiles, as well as for costs such as school tuition, have struggled to keep up with repayments in the aftermath of layoffs and salary cutbacks.
In January of this year, the number of loan accounts adversely classified with CRBs reached 14 million, highlighting Kenyans’ repayment difficulties.
After the CBK removed a three-month listing embargo in August, blacklisted accounts increased 45 percent in the five months between August and January.
According to CRB data, the number of loans in arrears for more than 90 days had risen to 14,035,718 by January this year, up from 9,673,258 in August 2020.
In the banking sector, the ratio of non-performing loans to total loans was 14 percent in June, down from 14.6 percent at the end of March, showing the economic recovery for consumers and companies.