Business Daily (Nairobi)
David Mugwe
9 December 2011
Companies licensed to collect and distribute credit information on consumers are waiting for legal changes to be able to share with lenders comprehensive data that will help in profiling borrowers.
Lenders are required by law to report negative information on loan defaulters to the two credit reference bureaus, while borrowers are allowed to ask for positive information, limiting benefits of the data.
The Central Bank of Kenya (CBK) in 2010 licensed CRB Africa to handle the credit information.
“There has been work going on in terms of expanding the law so that other information may be included,” said Mr Wachira Ndege, the CEO of CRB Africa. Mr Ndege said Kenya’s information sharing industry is still “in an evolutionary state” and, now, only negative data is being shared.
Metropol Credit Reference Bureau, the other credit reference bureau in Kenya, was allowed to operate in April this year and the industry has also started reaching out to other non-banking organisations to build more detailed consumer information data bases.
Mr Sam Omukoko, the chief executive officer of Metropol East Africa, said the company has been developing two data banks, one for banks and the other for non-banking information.
“We have been approaching other organisations such as the landlord associations, Kenya Power and other trade organisations to build the other data base,” he said.
Sharing of information, according to the law, is now restricted to the commercial banks, meaning that the requests made to other utilities including telecoms, power, and water firms will be used in the future.
This is the scenario despite the non-banking institutions expressing interest to be included in the pipeline of sharing consumer data.
Chinese wall
Microfinance companies have been pushing to be included while government agencies such as the Higher Education Loans Board (Helb) have been reporting loan defaulters to the bureaus.
Mr Omukoko said once the concept of information sharing is accepted and the law is changed so that “the Chinese Wall collapses” all organisations will benefit from what is being collected.
“Our target is for individuals and business to be able to access full file information,” said Mr Omukoko, but added it would take time to pick up in East Africa. The current system was set up to reduce non-performing loans in the banking sector, reduce the cost of accessing credit in Kenya.
According to the CBK, since the launch of the information sharing initiative mid last year, request for credit reports has been growing. A total of 1,060,865 reports had been requested as at the end of September this year compared to 728,553 end of June and 531,591 three months earlier.
The stock of gross non-performing loans declined by one per cent to Sh57.7 billion in September from Sh58.3 billion in June while the quality of assets, measured as a proportion of net non-performing loans to gross loans, improved from 1.9 per cent to 1.8 per cent over the same period.
The cost of getting credit has however remained high and the number of loan accounts has not been growing at the same rate as the use of credit reports and the decline in non-performing loans.
The number of deposit accounts stood at 12.8 million as at the end of June this year compared to 2.1 million loan accounts in the banking sector.
The bankers association is pushing for sharing of positive consumer data with the reference bureaus, saying a system that specialises in defaults alone has many disadvantages, including the fact that it does not help promote access to credit.
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