Trouble For Borrowers As Banks Resume Listing Defaulters On CRB

By Nsunjo Erica

CBK’s suspension of all banks and other lending institution listing loan defaulters on Credit Reference Bureaus (CRB) came to an end and now banks and financial institutions have the freedom to resume the listing.

The move to suspend the CRB listings in March was to provide Kenyans with ample time to sort out their finances following the outbreak of the COVID-19 pandemic that sabotaged people’s income and increased their inability to pay loans.

Speaking earlier on Wednesday, Central Bank of Kenya (CBK) Governor Patrick Njoroge ruled out a further extension to the moratorium introduced in March as part of measures to cushion borrowers from adverse economic effects of the pandemic.

“From October 1, the banks will begin looking at borrowers and accessing how they are doing on payments. If you have not paid your loans, you have about three months to regularize your payments,” Dr. Njoroge said.

Unregulated digital lenders who include applications such as Tala and Branch will however not be eligible to listing defaulters following their expulsion from the credit information sharing system CIS in April this year.

The CBK has challenged borrowers in distress to move in earnest to resolve their loan payments including updating redemptions or seeking out reprieve as the directives given to banks to restructure loans remain open to March 2021.

According to data collected from Kenya’s three official credit references, 3.2 million Kenyans were listed as loan defaulters at the end of 2019 in comparison to 2.7 million in 2018.

Following current financial reports, listed loan-defaulters are however bound to increase this year after the banking sector ratio of gross non-performing loans (NPLs) hit a high of 13.6 percent in August or an equivalent Ksh.354 billion.

Additionally, following CBK’s directives for banks to restructure loans, banks have continued restructuring and according to current CBK reports, loan restructures have surpassed the 1 trillion shillings mark. The total restructures represent 38 percent of the total banking sector loan book tabulated at 29 trillion shillings.

Following the increasing money in loan restructures, the Central Bank of Kenya (CBK) through the Monetary Policy Committee (MPC) decided to retain the Central Bank Rate (CBR) at 7 percent as it continues to monitor the measures put in place in March during the advent of Covid-19.

About CBK’s Extension Of Listing Loan Defaulters in March.

In March, the Central Bank of Kenya nullified the listing of loan defaulters by all banks and other lending institutions on the credit reference bureau (CRB) as a measure to help Kenyans deal with the financial distress caused by the pandemic.

The news from the CBK in March came as music to more than 2.7 million Kenyans who were either listed or set to be listed on the CRB for “failing to pay loans on time.”

According to the CBK directives to commercial banks in March, a borrower was to only be considered to have defaulted a loan after six months and would not be listed on CRB before that.

The directive was given by CBK aimed at aligning mobile loans and normal loans, meaning in the near future, Kenyans would only be listed on the CRB only after defaulting a loan in six months.

READ: Banks Are Demanding Kenyan Borrowers More Than Ksh.1 Trillion