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Defaulters Warned as CRB Listing Resumes

  • Loan defaulters have been put on alert after banks were allowed to resume Credit Reference Bureaus (CRB) listing. 

    The Central Bank of Kenya (CBK) issued the green light to banks after a three month notice period for blacklisting borrowers of unpaid credit expired. 

    On October 1, 2020, CBK lifted the six-month freeze for listing defaulters who were cushioned during the Covid-19 pandemic. 

    It, however, directed banks to assess the performance of all loans that were performing before April 1, 2020. 

    File image of Kenyan banknotes

    File image of Kenyan banknotes

    File

    Defaulters with loans that were performing before April 1, 2020, but went into arrears were asked to regularise loans by the end of December 2020 before being listed with CRB.

    Banks were asked to notify defaulters before listing them with CRB for loans owing arrears after December 2020. 

    Earlier in 2020, the CBK banned hundreds of mobile loan app companies from listing defaulters with CRB. 

    More than 337 unregulated digital mobile lenders and micro financiers were banned as part of the CBK’s efforts to reform the emerging digital lending market. 

    According to data in the 2019 CBK report, the proportion of defaulted bank loans hit a 13-year high of Ksh366 billion, reflecting the cash flow burden on workers and businesses brought about by the pandemic hardships.

    Non-performing loans (NPLs) rose from 12.5% to 13.1% – the highest since August 2007 when it stood at 14.41%.

    Over 3.2 million Kenyans are blacklisted for defaulting on loans with data indicating that the number jumped from 2.7 million in 2019.

    In October 2019, commercial banks in Kenya began the process of pushing for payment of interest accrued on loans during the pandemic. 

    The banks and lenders also hinted at conducting auctions for collaterals as they seek to recover the funds issued through loans. 

    Defaulting also affected interests for loans as banks sought CBK’s permission to reprice the cost of loans based on borrowers’ risk and increase risk premium. 

    The move will see an increase in interest rate spread – what remains after banks deduct what they pay for deposits from what they earn from loans.

    President Uhuru Kenyatta and Central Bank Governor Patrick Njoroge during the launch of the new generation coins on December 11, 2018.

    President Uhuru Kenyatta and Central Bank Governor Patrick Njoroge during the launch of the new generation coins on December 11, 2018.

    PSCU

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