Relief for Borrowers as President Stalls CRB Listings for a Year

Loan borrowers will now be relieved after an announcement by President Uhuru Kenyatta stated that negative Credit Reference Bureaus (CRB) reports listed from October 2020 will not apply for another 12 months to loans worth less than Sh5million.

This preceeds a move by lenders to resume listing of loan defaulters with CRBs in January following the expiry of the three-month notice period for blacklisting borrowers of unpaid credit.

Speaking during the Mashujaa day Celebrations in Wang’uru Stadium, Kirinyaga County yesterday, the head of republic noted that borrowers defaulting on loans of less than Sh5 million will not be blacklisted at CRBs while those already blacklisted will be dropped in a bid to cushion businesses recovering from Covid-19 hardships.

“The relevant authorities will, for loans less than Sh5 million, effect a moratorium of listing in CRBs for a period of 12 months to end September 2022,” President Kenyatta stated.

The move is part of a stimulus package to cushion distressed businesses and families from the effects of the Covid-19 pandemic, which have greatly cut consumer demand and seen many jobs lost, as businesses strive to cut costs.

The announcement by the President will now prevent saccos and microfinance firms from providing free negative credit information to Kenya’s three credit bureaux, something they have been doing since June.

This is after borrowers complaint of not being able to borrow more after the CRB listings. However, the Kenyan credit market will be hardest hit since banks and lending institutions have been struggling with non-performing loans.

Nevertheless, the rate of bad loans in Kenya however had started improving as the economy recovered from the effects of the Covid-19 pandemic, with the latest data from the Central bank of Kenya (CBK) revealing that the rate of non-performing loans in the country eased further by 10 basis points in August to 13.9 compared to 14 per cent in June.

The announcement to remove the defaulters from the list could see an increase in the Non-performing Loans (NPLs) ratio, with the international credit rating agents’ prediction of over 15 per cent NPL rate last year and even a higher one this year.

Last year, the Covid pandemic took a huge toll on local lenders with the rate of non-performing rising from 12 per cent in 2019 and moving towards 15 per cent mid-last year.