CENTRAL BANK OF KENYA
Remarks by
PROF. NJUGUNA NDUNG’U
GOVERNOR
CENTRAL BANK OF KENYA
During the
THE 2ND REGIONAL CREDIT INFORMATION SHARING (CIS)
CONFERENCE
Hilton Hotel, Nairobi
September 24, 2013

Mr. Jeremy Awori, Chairman, Kenya Bankers Association;
Mr. Habil Olaka, Chief Executive Officer, Kenya Bankers
Association;
Mr. Benjamin Nkungi, Chief Executive Officer, Association of
Microfinance Institutions of Kenya;
Chief Executive Officers of various Commercial Banks,
Microfinance and Development Finance Institutions here present;
Representatives of various Central Banks from around Africa;
Representatives of IFC, USAID and FSD Kenya;
Representatives of the licensed Credit Bureaus (CRB Africa,
Metropol CRB and CRIF);
Distinguished Ladies and Gentlemen;
It gives me great pleasure to be here today to officially open this
landmark conference that brings together various players in the
credit information sharing (CIS) fraternity. This is the second such
conference, the first having been held in July 2011. We
appreciate the growing interest that the subject has generated
internationally, and more recently in Africa, as attested to by the
presence in this conference of representatives from various
countries. Let me extend a warm welcome to you all to Kenya. I
sincerely hope that you will enjoy Kenya’s hospitality and tourist
attractions during your stay in Kenya.

Ladies and Gentlemen; We are gathered here today because we
believe that CIS mechanism is vital for unlocking access to
affordable credit. Indeed the depressing statistics show that in the
year 2012, domestic credit stood at 44.9% of GDP in Sub-Saharan
Africa compared to 156.5% for the European Union. Besides cost of
credit, we do know that asymmetric information provides
difficulties and in fact acts as a mechanism for rationing credit.
Information capital will minimize these difficulties. Conferences
such as this allow participants to share experiences as well as
challenge each other. We are therefore happy to have participation
by you all.
Ladies and Gentlemen; you will recall that at the first regional
Credit Reporting Conference, we focused on International
Standards of Credit Reporting which were eventually released in
September 2011 by a Task Force coordinated by the World Bank,
with support from the Bank for International Settlements. These
principles are designed to ensure that credit reporting systems are
safe, efficient and reliable. It is important that at this conference
we review the performance of our respective countries in meeting
those standards. Further, I am informed that various local and
international experts will be making presentations during this
Conference covering recent developments and emerging issues.

Participants will be taken through CIS international benchmarks
and trends by experts from the International Finance Corporation
(IFC) of the World Bank Group. The conference will also provide
the delegates with an opportunity to discuss and share experiences
on fundamental issues on the subject of CIS.
Ladies and Gentlemen; The CIS mechanism in Kenya has evolved
significantly since it was unveiled in July 2010. There has been
increased usage of credit reports by banks in credit evaluation,
with the cumulative requests amounting to 2,907,395 as at June
30, 2013. This has greatly contributed to improved risk lending,
expedited lending decisions and improved loan repayment
culture, thus minimising the information asymmetries that
dominated the lending process in the banking industry. We have
succeeded in unlocking funds previously tied up in nonperforming loans and thus making them available to new
borrowers. Apart from banks, credit reports have also been useful
to other credit providers, for example the Higher Education Loans
Board (HELB), IDB Capital and the Agricultural Finance
Corporation (AFC). Most employers too, utilise credit reports in the
assessment of the suitability of prospective employees. All these
initiatives demonstrate the importance of CIS to the Kenyan
economy.

Ladies and Gentlemen; Despite these positive developments, the
mechanism has faced some challenges that need to be addressed
for the benefit of all stakeholders. Customers are yet to fully
benefit from the CIS mechanism. The cost of credit still remains
high to most borrowers. As it is well known, CIS alleviates the
problems of asymmetric information by countering adverse
selection, moral hazard and information monopoly thus enabling
lenders to make more informed decisions efficiently. Lenders
should therefore be able to extend credit to customers at more
favourable rates.
Other challenges include data quality issues, legal impediments,
inadequate dispute resolution mechanisms and limited access by
customers in rural areas. We recognise the various initiatives that
have been improvised to deal with some of these challenges. It is
also anticipated that the coming into effect of the soon to be
gazetted Credit Reference Bureau Regulations, 2013 will play a
major role in resolving most of the challenges. Towards this end,
the Regulations contain provisions for credit reference bureaus
(CRBs) to engage third party agents with a view to enhancing their
outreach. The Regulations have also placed greater responsibilities
towards customer protection and higher standards for data
collection, storage, processing and use.
Ladies and Gentlemen; CIS is also very pertinent from a regional
perspective. In the East African region; Uganda, Tanzania and

Rwanda have licenced private CRBs while Burundi has in place
a government run credit bureau. Many African countries have
also implemented regulatory reforms to enhance their credit
underwriting standards by embracing CIS. The integration of
several African countries has enabled several indigenous
financial institutions to establish subsidiaries in other countries.
Because credit markets in Africa are at different levels of
development, information sharing across borders presents an
opportunity to bridge the gaps in the various markets and assist in
weeding out cross border serial defaulters. Information asymmetry
has the potential of curtailing the entry of financial institutions
into African markets thus denying them essential investment
flows. We should therefore strive to deepen our credit markets
through initiatives such as CIS.
Ladies and Gentlemen; the CIS Regional Conference is being held
at a time when Kenya is unveiling five key reforms that will
significantly transform the effectiveness of this important beacon
of financial infrastructure in our economy. The five landmark
developments are: introduction of positive data sharing, inclusion
of Deposit Taking MFIs (DTMs) in CIS mechanism, implementing
an Alternative Dispute Resolution mechanism (ADR), allowing
credit bureaus to open agencies and the registration of the
Association of Kenya Credit Providers (AKCP) to spearhead a more
comprehensive CIS mechanism going forward.

The first two reforms were facilitated by the amendments to the
Central Bank of Kenya Act, Banking Act and Microfinance Act in
2012. The Banking Act and the Microfinance Act were amended
to require all institutions licenced under the two statutes to share
negative credit information on their customers through CRBs. The
Central Bank of Kenya Act was amended to require banks to share
positive information on their customers with CRBs. Allowing
lenders to share positive information, enables good borrowers to
build reputation collateral. Credit bureaus will soon be in a
position to provide credit scores using positive data from various
lenders. With good credit scores, the push for less stringent
demands for fixed assets as collateral will begin in earnest while
a positive credit report is an excellent bargaining tool for lower
interest rates. It allows us to develop an efficient collateral
technology.
The new requirement for participation of licensed DTMs marks
the first step towards inclusion of non-bank credit providers in
order to make the database more comprehensive. Expansion of the
database to other credit providers will provide a complete picture
of the customers and enable the providers develop tailored
products to their requirements. The benefit of a comprehensive
database is the minimization of customer over-indebtedness. A
comprehensive database also minimises the tendency of serial
defaulters migrating to lenders who do not share information.

The third and fourth reforms are intended to strengthen consumer
protection. The CIS Customer Complaints Office (CISCOF) has been
established as an interim Credit Information Ombudsman to help
resolve customer complaints regarding accuracy of data. This
Alternative Dispute Resolution process, which will be discussed in
this conference, will speed up dispute resolutions.
Finally Ladies and Gentlemen, the Association of Kenya Credit
Providers (AKCP) has been registered with the primary objective of
developing an efficient CIS mechanism in Kenya. This Association,
which we are launching today, will promote self-regulation
among licensed and non-licensed credit providers and ensure a
level playing field for credit providers who join the information
sharing mechanism. This is a major step in complimenting the
existing CIS regulatory framework.
These measures are expected to radically change the credit market
in Kenya, to benefit lower risk customers and enhance access to
credit by SMEs. Going forward, CIS being a relatively new area in
this region, there is need to raise public awareness on its
importance and safeguard ity of customer information.
The Central Bank of Kenya is committed and will work with all
relevant parties to ensure that the CIS mechanism grows to its full

potential. The efficiencies that will accrue to our credit market
will contribute significantly to the stability of the financial sector
and to the goals of our Vision 2030. As a demonstration of this
commitment, we have consulted with the Kenya School of
Monetary Studies and agreed to provide office space for the new
Association so as to give it a sound footing that also guarantees its
neutrality.
It is now my pleasure to declare this two-day Regional CIS
Conference officially open.
Thank you and God bless you all