CENTRAL BANK OF KENYA
KEYNOTE ADDRESS
by
PROF. NJUGUNA NDUNG’U
GOVERNOR
CENTRAL BANK OF KENYA
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Mr. Peter Kebati, Chairman, Board of Directors, Metropol Credit
Reference Bureau;
Mr. Sam Omukoko, Managing Director, Metropol Credit Reference
Bureau;
Board Members;
Representatives of Commercial Banks, Microfinance Banks and
other Financial Institutions;
Distinguished Ladies and Gentlemen:
It is a great honour for me to join you this morning to witness the
roll-out of another innovative financial product, Metropol’s
Consumer and SME Bureau Scores. At the outset, I wish to express
my gratitude to the Directors and Management of Metropol Credit
Reference Bureau (CRB) for inviting me to this auspicious
occasion.
Ladies and Gentlemen: The roll-out of full file banking sector
credit information sharing effective February 2014 is already
yielding positive results. We are gathered here today for the
inauguration of Consumer and SME Bureau Scores, which has
been made possible by the expanded credit information sharing
(CIS) mechanism. I take this opportunity to congratulate Metropol
CRB for quickly seizing the opportunity to develop a customer’s
scoring mechanism, that will contribute to the growth of the
credit market in Kenya. Introduction of credit scoring by

Metropol CRB will not only enrich the value of its credit reports
to the lenders but will greatly improve the lenders credit risk
management.
Ladies and Gentlemen: When the CIS mechanism was launched
in 2010, the viability of the licensed CRBs hinged primarily on
the volume of credit reports accessed by the lenders. However,
with the introduction of full file credit information sharing,
CRBs are now well positioned to introduce value add products
such as credit scoring that will not only propel their success but
will contribute to the development of the financial sector;
especially the dynamic and changing profile of collateral
technology and pricing credit in our financial market.
As you are aware, a high level Committee was established under
the leadership of the Cabinet Secretary to the National Treasury
in January 2014 to explore ways of increasing private sector
credit and mortgage finance in Kenya. The formation of the
Committee that comprised of representatives from the National
Treasury, Central Bank of Kenya, Kenya Bankers Association and
other private sector representatives and market players, was
informed by the Government’s desire pursuant to Vision 2030 to
transform the country to a middle income status by 2030.
Countries that have attained a middle income status, such as

Malaysia and South Africa, have reported private sector credit to
GDP ratios of more than 100%. Kenya’s current ratio of private
sector credit to GDP of about 40% is way below those of middle
income and comparable countries. In addition, Kenya has only
about 20,000 mortgage accounts concerted efforts to improve the
situation were thus deemed necessary.
Ladies and Gentlemen: The Committee finalized its task in April
2014. The various recommendations made by the Committee are
already being implemented. As we gather here, the banking sector
is at the deep end of rolling out a transparent pricing
mechanism, whereby all banks are required to price their loans
based on a common reference rate, the Kenya Banks’ Reference
Rate (KBRR). This was the first of the recommendations by the
Committee. To supplement the KBRR, the banking industry has
also rolled out the use of the all-inclusive Annual Percentage
Rate (APR) in loan pricing. This is loan pricing that includes
the interest rate on the loan and other fees and charges such as
appraisal , legal and valuation fees.
KBRR is computed as an average of the Central Bank Rate (CBR)
and a two-month moving average of the 91-day Treasury bill
rate, and announced by MPC. The CBR reflects the monetary
policy direction consistent with inflation profile, while the 91day Treasury bill rate reflects the return on short term risk free
assets. Prior to this every bank had its own base rate, whose
composition was not known to the borrowers. This now opens a

transparency window for borrowers who can compare and
negotiate lending rates across banks.
Banks are now required to explain to their customers and the
Central Bank the composition of the premium (k) they charge
above KBRR. The Central Bank will periodically publish on its
website details of the premium (k) obtained through returns from
the banks. The CBK has already developed a template for this
information capturing process. This will in turn promote
transparency and competition in the pricing of credit. Borrowers
are now empowered to compare interest rates offered by banks as
they shop for the cheapest credit facilities. This is the surest way
of increasing credit in the market to the productive and
profitable sectors.
The contribution by Metropol’s credit scoring is to help customers
know their risk profile and how their loans will be priced but
also empower them with tools to negotiate for better rates.
Ladies and Gentlemen: Apart from the introduction of KBRR, the
Committee made other recommendations that require the
Government and other players including the Central Bank to
implement certain policy and institutional reforms to promote
private sector credit and mortgage finance in Kenya. These
reforms will have an overarching objective of reducing the cost of
doing business. These recommendations include:

Promotion of sharing of infrastructure by banks.
Fast tracking of the on-going modernization of the Lands and
Companies Registries to facilitate quicker collateral process.
Establishment of a legal framework for creation of an
electronic moveable assets register.
Enhanced financial services consumer protection and
education.
Ensure that Government borrowing does not crowd out private
sector as well as adopting alternative sources of funding such as
sovereign bonds. (This has been done with success).
Fast tracking capital markets reforms to make capital markets
more efficient and attractive alternative sources of long term
funding.
Facilitate lines of credit for large housing development projects
targeted at lower income buyers for owner occupation.
These recommendations are at different levels of implementation.
Ladies and Gentlemen: Integrity and sanctity of information
shared under the credit information sharing mechanism and
building information capital are critical in promoting
confidence in the mechanism. Once individuals and
participating entities are assured of sanctity of the mechanism,
application will increase and more innovative ideas will be
shared to enrich the mechanism. This is the reason

why consumer protection measures under the CIS mechanism
were strengthened under the revised Credit Reference Bureau
Regulations, 2013 that became operational in February 2014. In
the same vein, I urge Metropol CRB and other CRBs to ensure that
their value add products are introduced within the same
precincts of consumer protection. Any blot on consumer
confidence may ruin a noble cause that has taken several years
to establish.
Ladies and Gentlemen: As I conclude, it is worth noting that we
are yet to reach the optimal level in credit information sharing.
There are still several credit providers who currently are only
able to contribute data but cannot access credit reports directly.
We need to bring all financial sector and non-financial sector
credit providers into the ambit of the CIS mechanism. The
Central Bank will continue to support market development and
market players in the development of an all-encompassing CIS
mechanism. This will undoubtedly increase the supply of credit
to the private sector to support Kenya’s growth and development
as envisaged under Vision 2030; but more importantly,
increasing supply must go hand in hand with declining and
appropriate pricing of this credit. But above all this credit must
be destined to productive sectors of the economy to make a
difference to an all-inclusive growth.

With these few remarks, Ladies and Gentlemen, it is now my
distinguished honour to declare the Metropol CRB Consumer and
SME Bureau Scores officially launched.
Thank You