In line with President William Ruto's plan to initiate reforms to the operations of Credit Reference Bureaus(CRBs) in a bid to better credit access to Kenyans, the Central Bank of Kenya (CBK) on Monday, November 14, announced the rollout of a Credit Repair Framework seeking to improve the credit standing of mobile phone digital borrowers.
The framework is aimed at relieving the financial burden on loanees whose status has been non-performing owing to the blacklisting by CRBs by offering a six-month repayment period to reinstate performing status.
Further, the commercial banks, microfinance banks and mortgage finance companies have been directed to provide a discount of at least fifty percent of the non-performing mobile phone digital loans, and update the borrowers credit standing from non-performing to performing.
The credit repair framework slated to expire on May 31, 2023, will cover loans with a repayment period of 30 days or less and were offered by these institutions through mobile phones, majority of which have caused strain on 4.2 million Kenyans who are blocked from accessing credit due to blacklisting.
"It is anticipated that the Framework will enable over 4.2 million mobile phone digital borrowers, adversely listed with CRBs, to repair their credit standing, and the total value is approximately Ksh.30 billion equivalent to 0.8 percent of the gross banking sector loan portfolio of Ksh.3.6 trillion at end October 2022," the announcement by the CBK read.
Kenyans hence have until May 31, 2023 to pay their outstanding loans, upon which the framework expires and the credit standing of the borrowers with respect to their loans will depend on their repayment performance during the six-month period.
CBK noted that a large majority of the loans from the 4.2 million Kenyans on the list are personal or in the micro- enterprises sectors following the adverse effects by the COVID-19 pandemic, including loss of employment and closure of micro-enterprises and is aiming to enable this segment of borrowers to access credit as they rebuild their lives and livelihoods.
The national lender also urged Kenyans to be mindful of their payment obligations to maintain better credit standing for the future.
"CBK reminds the public to honor their payment obligations on their credit facilities when they fall due. This will enable them to build a good credit history based on their payment behavior and thereby obtain loans at better rates. When borrowers experience challenges in repaying their loans, they should proactively engage their lenders," the statement read.