No more arbitrary blacklisting: How Ruto has rescued loan defaulters
President William Ruto has pledged to work with the Credit Reference Bureau (CRB) to come up with a new score-rating system to eliminate the culture of blacklisting.
Dr Ruto, who spoke after he was sworn into office on Tuesday, made the remarks at the Moi International Sports Centre, Kasarani.
The president said he’ll put measures to end the current practice of arbitrary and all nothing blacklisting of borrowers.
“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,” he said.
“Our starting point is to shift the Credit Reference Bureau (CRB) framework from its current practice of arbitrary, punitive and all or nothing blacklisting of borrowers.”
The Head of State further said that his government will work with Credit Reference Bureaus – CRB, to end blacklisting of borrowers that has locked out millions of Kenyans from accessing credit facilities.
“We will work with Credit Reference Bureaus, a new system of credit score rating that provides borrowers with an opportunity to manage their creditworthiness. This will eliminate blacklisting,” he added.
Inquiries for borrowers’ profiles from CRBs hit a record 39.8 million last year as lenders intensified scrutiny to reduce the mounting loan defaults.
Data from the Central Bank of Kenya (CBK) shows that the requests jumped 28 percent from 30.2 million a year earlier when loan defaults surged by Sh90.8 billion amid Covid-19 economic hardships.
During the review period, the CBK had barred unregulated digital mobile lenders from forwarding the names of loan defaulters to CRBs and stopped the blacklisting of borrowers owing less than Sh1,000.
A negative listing makes it nearly impossible for one to take a loan from another credit provider, serving as deterrence against default.
Last year, former President Uhuru Kenyatta announced the suspension of CRB listing for loans that were defaulted from October 2021 and the relief from blacklisting to the end of this month.
The CRB listing relief was part of a stimulus package to cushion distressed businesses and families from the effects of the Covid-19 pandemic, which have hit consumer demand and forced businesses to shed jobs and cut back their operations.
Borrowers reported to one of Kenya’s three credit bureaux — Metropol, TransUnion and Creditinfo International, jeopardise their chances of being able to borrow more.
Data from the CRBs showed last year a third of Kenyan loan accounts are negatively listed as defaulted in an economy struggling to create jobs for the growing number of skilled youth who have found themselves in a debt trap.
The bulk of the new listings are for mobile digital loans despite the government having frozen the blacklisting of defaulted loans below Sh1,000 from April to December last year.
“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,”
Dr Ruto said. “We shall take measures to drive down the cost of credit.”