World Bank faults Ruto’s plan to have Kenyans with loans less than Ksh5 million delisted from CRB (Credit Reference Bureau).
The Central Bank of Kenya’s (CBK) order to have Kenyans with loans under Ksh5 million removed from the Credit Reference Bureau (CRB) has been questioned by the World Bank Group (WB) .
The global financial group observed that the action was not only unproductive but also put credit lenders at risk in a report titled, Fintech and the Future of Finance.
According to the World Bank, the rule made it difficult for financial institutions to access potential borrowers’ credit scores.
“The popularity of mobile money in Kenya, for example, has led to broader financial inclusion but also to the blacklisting of numerous borrowers for defaults on nano-loans under ksh1200 ($10).
“One of the responses of the Kenyan regulator was to block mobile lenders from recording defaults with the credit bureau. This could be ineffective and hurt digital and conventional lenders alike seeking to understand the full indebtedness of a potential borrower without addressing the product appropriateness issue,” read the report in part.
In addition, the World Bank stated that the availability of mobile lending applications had made digital lending a mainstream practice in the country.
However, the financial group underlined that defaulting on loan repayment was still a big challenge.
The majority of borrowers could not comprehend the terms and conditions set by online lenders, which helped to explain this.
“While digital microcredit has expanded access to credit in some developing economies, countries such as Tanzania and Kenya have seen large numbers of borrowers unable to repay loans due to irresponsible lending practices,” the global financial institution stated.
The 2022 report made reference to CBK’s directive that was issued in November 2021 following orders issued by former President Uhuru Kenyatta during last year’s Mashujaa Day celebrations.
At the time, Uhuru ordered the directive to take effect for one year explaining that the move would enable Micro, Small, and Medium Enterprises (MSMEs) to access credit in their post-global pandemic recovery plan.
Prior to the elections on August 9, one of the major topics that dominated campaigns was the listing of Kenyans on the CRB.
Several financial websites have cited statistics stating that over 14 million Kenyans are blacklisted on CRB.
Notably, President William Ruto also disclosed during his inaugural address on September 13 that his administration had discussions with CBK regarding the CRB listing.
“Financial inclusion and access to credit are critical in addressing the fundamental factors of the cost of living, job creation, and people’s well-being. We shall take measures to drive down the cost of credit.