Big blow to Mobile Loan Lenders as CBK clears their loan defaulters from CRB

At least 624 digital lenders and credit-only providers have suffered a setback after the Central Bank of Kenya (CBK) barred them from sharing information on loan payments and defaults in 2020.

Central Bank of Kenya Bars 624 Mobile Lenders from Sharing Loan Borrowers’ Details with CRB

CBK has barred 624 mobile lenders from sharing loan borrowers’ details with CRB.

Numerous complaints filed by customers occasioned this.

Information released by the credit reference bureaus (CRBs) in February 2021 indicated that a whopping 14 million Kenyans have had their accounts blacklisted for failing to service their loans.

New data indicate that the country had 1,994 third-party data providers to share borrowers’ loan defaults and payments with Credit Reference Bureaus (CRBs), translating to a 23.8% drop from 2,618 firms licensed in 2019.

Public outcry

There has been a public outcry over widespread misuse of the credit information sharing (CIS) mechanism.

This move came at a period of increasing loan defaults and increased risk occasioned by the outbreak of the COVID-19 pandemic, which occasioned induced layoffs, salary cuts and low sales firms.

CBK also said that loan applications rebounded in May 2019 after falling in April 2021, in what the Apex Bank reads as the indication of a rebound in the economy.

In its monetary policy statement released on Wednesday, May 26, CBK retained the policy rate at 7% for the eighth consecutive time.

“The freeze was aimed at cushioned borrowers in the wake of the COVID-19 economic fall-out that increased risk and saw the share of unpaid loans rise to the highest level since August 2007,” CBK’s Supervision Annual Report 2020 reads in part.

This comes even as Equity Bank says it will tighten the widening up of its COVID-19 relief measures within the next six months, with 34% of the KSh 171 billion worth of accommodated loans having resumed the pre-COVID-19 repayment schedule.

Speaking during the bank’s financing for the first three months of 2021, the group’s CEO James Mwangi indicated that the bank has stepped up its provisioning for bad loans 7.1%, which is supported by a credit risk guarantee.

Non-performing loans

The bank’s total non-performing loans stood at KSh 55.8 billion as of the end of March 2021, up from KSh 39 billion in 2020.

“This is a significant growth of 31%. This means that the bank has bounced back to pre-COVID-19 days,” Mwangi said.

The move to suspend the listing of defaulters by loan facilities was announced in April 2020. The government put in place measures to protect borrowers from the biting effects of the coronavirus pandemic.

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