CENTRAL BANK OF KENYA
REMARKS
by
PROF. NJUGUNA NDUNG’U
GOVERNOR, CENTRAL BANK OF KENYA
during the
EXECUTIVES DINNER TO LAUNCH THE SECOND PHASE OF THE
CREDIT INFORMATION SHARING PROJECT
Hotel Intercontinental, Nairobi
February 16, 2012

Dr. Geoffrey Mwau, Economic Secretary, Ministry of Finance;
Dr. Yira Mascaro and Mr. Ulrich Matthias Zeisluft, Representatives of
the International Finance Corporation and World Bank;
Mr. Richard Etemesi, Chairman, Kenya Bankers Association;
Mr. Habil Olaka, CEO, Kenya Bankers Association;
Chief Executives of Utility and Telecommunications Service
Providers;
Chief Executives of various Development Finance Institutions;
Mr. Carilus Ademba, CEO SACCO Societies Regulatory Authority;
Mr. Ben Nkungi, CEO, Association of Microfinance Institutions of
Kenya;
Chief Executives of Licensed Credit Reference Bureaus in Kenya;
Distinguished Guests;
Ladies and Gentlemen:
I am delighted to be here today to make some brief remarks at this very
auspicious occasion of ushering in a new phase of the Credit Information Sharing
(CIS) Project. On behalf of the Central Bank of Kenya which is co-hosting this
event with the Kenya Bankers Association, let me extend a very warm welcome to
all credit providers represented here today. We look forward to an interactive
evening of sharing our past successes and identifying the opportunities for a
broader collaboration between various market players.
Before I proceed; let me thank our partners FSD Kenya for sponsoring this
dinner event and for their continued support towards the development and
rollout of the CIS mechanism in Kenya. In addition, we are extremely grateful to
the Financial and Legal Sector Technical Assistance Project (FLSTAP),
International Finance Corporation (IFC), and United States Agency for
International Development (USAID) for their key contributions towards the early
stages of the development and rollout of credit information sharing in the
banking industry in Kenya.

Ladies and Gentlemen: The Central Bank of Kenya has championed the cause
for sharing of credit information because of our recognition that this tool creates
significant impact on efficiency and expansion of the credit markets. Much
empirical work has been conducted on the economic impact of information
sharing in consumer credit markets. The broad and consistent conclusions point
towards (1) greater financial inclusion, (2) access to credit and (3) improved
lending performance. Enhanced financial access arises whenever information
collateral is built into credit decisions. The outcome is: fewer mistakes by
lenders; less default by borrowers and appropriate pricing of credit.
Our partnership with the Kenya Bankers Association in this project has yielded
considerable results. Two credit reference bureaus have been licensed and there
is active engagement with all commercial banks and the Deposit Protection Fund
in exchange of information on Non-Performing Loans. A total of 1,306,439 and
6,041 credit reports have so far been accessed by banks and bank customers
respectively from the two licensed credit reference bureaus. This translates to a
monthly average of 76,849 and 355 credit reports for banks and bank customers
respectively. This uptake of credit referencing is quite encouraging and this will
be a pillar of growth in the Kenyan financial sector.
Having said that, Ladies and Gentlemen, we are alive to the fact that the
current CIS mechanism has a number of challenges. These challenges may be
categorised into four broad areas. First and most critical is that the current
system is limited to commercial banks and, very soon, to Deposit
Taking Microfinance Institutions. If this is allowed to continue, various
credit providers may create “silo” databases, often referred to as “segmented”
information sharing. Credit reports generated by such systems give an
incomplete and often misleading picture. “Comprehensive” systems, by contrast,
allow a more complete credit profile of a consumer to be drawn. For small
businesses, it also includes trade credit data and leasing arrangements. These
non-financial services, such as utility and telephone services, are usually more
common than are financial payment data, particularly in less developed markets,
where, for example, the number of cell phone users may far outstrip the number
of credit card users. The use of non-financial data in credit files offers the

promise of a diversified information capital that will facilitate extension of
reasonably-priced credit to those who have not previously accessed formal credit.
The second challenge is the need to move towards achieving full file reporting
by participating institutions. Full file reporting, that is, sharing of both negative
and positive information on customers is important as it enables risk based
pricing through credit scoring. It is important to have full file reporting to
facilitate credit scoring mechanism and enhance the information capital.
Further, full file comprehensive credit reporting systems are more successful at
expanding access to credit, improving loan performance and preventing over
indebtedness. We therefore appeal to the credit providers on the need to
consider sharing full file information, in order for our market to enjoy the full
benefits of the CIS mechanism.
Thirdly: we face the challenge of ensuring that both lenders and borrowers are
sufficiently sensitised on the merits of a robust credit information sharing
mechanism and are able to use it to their advantage. This calls for well thought
out awareness campaigns and capacity building programs. It is particularly
important that lenders develop skills that enable them apply credit management
tools as effectively as possible so that low-risk customers are rewarded
appropriately.
Finally, the success of this process hinges on a robust legal framework that
supports a full-file comprehensive data sharing mechanism. We need to develop
an effective legislation that addresses all aspects of credit bureau operations,
data management and consumer protection.
The challenges in the current system call for collective efforts by all stakeholders.
I am pleased to report that CBK and KBA through the Kenya Credit Information
Sharing Initiative (KCISI) is keen to establish modalities that make the CIS
mechanism more comprehensive. Indeed, we continue to receive requests from
non-bank lenders to be allowed to participate in the mechanism. Further, the
presence of key players in the credit market in this room today is a testimony to
the high interest this mechanism has generated.

Ladies and Gentlemen: As I conclude, let me take this opportunity to thank
FSD Kenya, our development partner in several projects aimed at inclusive
financial markets in Kenya; World Bank; Kenya Bankers Association who have
been partnering with us in this initiative; and all market players who have played
key roles in this process, but more importantly those who came here today to
take part in the launch of the second phase of the Kenya Credit Information
Sharing Mechanism. I do believe that with your support we can achieve the
desired results of the second phase and that the ambition of developing a fullyfledged financial infrastructure will become a reality soon in Kenya.
With these few remarks, I wish to declare the second phase of the Credit
Information Sharing Project officially launched.
Thank you all and enjoy the evening!