The Central Bank of Kenya (CBK) has announced a Credit Repair Framework that could see over 4.2 million borrowers get delisted from Credit Reference Bureaus (CRBs).
According to a press release issued by the regulator on Monday, the restricted framework, which will end on May 31, 2023, will require commercial banks, microfinance institutions, and mortgage finance firms to offer a discount of at least 50 percent on the outstanding non-performing mobile phone digital loans.
After the discount, the borrower’s credit standing will be changed from non-performing to performing, 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 as such to Credit Reference Bureaus (CRBs),” CBK said.
After the discount is granted, the institution will, according to CBK, work with the borrowers to establish a repayment schedule for the loan’s remaining balance that will last until May 31, 2023.
“The Framework will cover loans with a repayment period of 30 days or less and were offered by these institutions through mobile phones,’ CBK said.
The total value, according to CBK, is around KES 30 billion, or 0.8 percent of the gross banking sector loan portfolio, which was KES 3.6 trillion at the end of October 2022.
According to CBK, the COVID-19 pandemic had a negative impact on the borrowers covered by the Framework, who primarily work for individuals and small businesses.
“Their lives and livelihoods were severely impacted by the pandemic through inter-alia loss of employment and closure of their micro-enterprises. The adverse effects of the pandemic continue to linger for the covered borrowers,” CBK said.
CBK requested the public to honor their payment obligations on their credit facilities when they fall due in order to establish a solid credit history based on their payment behavior and be eligible for loans with lower interest rates.
“When borrowers experience challenges in repaying their loans, they should proactively engage their lenders,’ CBK added.
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