How the Credit Information Sharing System Will Work for You
Dr. Patrick Njoroge (729 words)
On April, 8, 2020, new Regulations came into force for Credit Reference Bureaus (CRBs)
and Kenya’s Credit Information Sharing (CIS) system, refreshing the framework that has
been in place since 2013. The Regulations provide for the licensing and supervision of
CRBs by CBK, and importantly, a framework for the exchange of borrowers’ credit
information between lenders and CRBs.
The Credit Information Sharing (CIS) mechanism aims to bridge the information gap
about borrowers’ creditworthiness—by taking into account the borrower’s credit history
and allowing credit to be priced accordingly. A good credit record resulting from a good
repayment history demonstrates the borrower’s higher creditworthiness and should lead to
a lower cost of credit. It is therefore an important tool in ensuring that the banking sector
works for and with Kenyans, as was outlined in the Banking Sector Charter that was
launched in February 2019 by CBK.
The CIS system has not worked as expected, requiring a refresh. For instance, it was seen
as a punitive “blacklisting” tool that bars Kenyans from getting loans, instead of helping
borrowers take advantage of their credit history to get better pricing of loans. There are
378 million records in CRBs, of which, 42 million are blacklisted. Of these, 13 million are
being blacklisted for amounts less than Ksh. 1,000.
Customers have also complained about slowness in updating CRB records after payment
arrears have been cleared; delays in correcting errors by lenders who mistakenly
“blacklisted” compliant borrowers; and the cost of clearance reports for youth entering the
employment market. Unregulated digital (mobile-based) and credit-only lenders were seen
as particularly outrageous in using CRB listing and other measures to harass delinquent
borrowers.
The improvements in the CIS are to be seen against a backdrop of two important pillars to
strengthen the behaviour of banks. Banks are now required to adopt a risk-based pricing
approach that takes into account borrowers’ credit reports in the pricing of loans. CRBs
are required to generate borrowers’ credit score that lenders can use to assess their
creditworthiness. Banks are also required to be customer centric, including by promptly
resolving customer complaints including those relating to CRBs. These pillars will go a
long way in addressing some of the underlying concerns. However, unregulated digital

lenders and credit-only institutions have been removed from the CIS mechanism as they
lack effective customer complaints and redress mechanisms.
The refresh of the Regulations improves the CIS framework for the benefit of borrowers
and lenders alike. The key elements include:
First, the new Regulations set a minimum threshold of Ksh.1,000 for negative credit
information that is submitted to CRBs by lenders. Thus, borrower’s information regarding
non-performing loans below that threshold will not be submitted to CRBs. Further, more
than 5 million unique borrowers comprising more than one-third of the borrowers in
CRBs—that were “blacklisted” for amounts less than Ksh.1,000 will be “delisted.”
Second, first-time CRB clearance certificates will now be provided by CRBs at no charge.
This will be particularly beneficial to our youth and graduates who are seeking formal
employment for the first time, as the cost of these certificates had become a barrier.
Third, SACCOs regulated by the Saccos Regulatory Authority (SASRA) will now
provide and access information from CRBs, similar to commercial and microfinance
banks. SACCOs are major players in Kenya’s financial sector and a significant number of
Micro, Medium and Small Enterprises (MSMEs) borrow from SACCOs. It is therefore
important that the credit history with SACCOs be included in assessing a borrower’s
creditworthiness.
Four, the Regulations strengthen the supervision of CRBs in accordance with global best
practices. In particular, they enhance the governance of CRBs by requiring a diversified
Board composition, and empower CBK to set minimum capital requirements to ensure
CRBs are financial sound.
An important development was the suspension of the sharing of negative information for a
period of six months from April 1 to September 30, 2020, to lessen the economic impact
of the Coronavirus (COVID-19) pandemic. Loans that were performing but have become
non-performing during that period would not lead to a “blacklisting” of the borrowers.
These changes and actions present a secure path for the CIS framework to work for and
with Kenyans. On their part, borrowers should repay their loans as scheduled to develop a
good credit history. This would underpin the financial sector’s journey to deliver
affordable credit, driving shared prosperity and growth for Kenyans.
The writer is the Governor of the Central Bank of Kenya