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18 May 2020

Otiato Guguyu, Business Daily (Kenya)

Kenya: Govt. agency to fine banks locking out borrowers blacklisted by credit reference bureaus mostly due to predatory lending by digital lenders

"Banks face fines for locking out blacklisted borrowers"

Banks, saccos and micro-finance lenders now face a fine of Sh2 million for every defaulter they deny loans to for being listed negatively with the country’s credit reference bureaus (CRBs). This new regulation represents a fresh attempt to unlock credit to firms and workers hard hit by effects of coronavirus pandemic. The Treasury has introduced the fine in regulations aimed at cleaning up the CRBs blacklist and enhancing borrowers’ chances of being able to borrow more. Banks and saccos have been reluctant to offer loans to the more than 2.5 million Kenyans that have been negatively listed with the CRBs.

Introduction of penalties to curb the practice of denying defaulters loans comes in a period when the government expects lenders to boost the cash flow of workers and firms battered by the effects of Covid-19 pandemic. Kenya has reported 887 positive cases and 50 deaths. The virus has triggered job cuts and hit firms’ sales on low demand for their products and services, forcing households and companies to seek loans in their struggle to remain afloat...Commercial banks, regulated digital lenders and saccos have also been barred from listing defaulters who borrowed less than Sh1,000 or have been unable to clear balances that are less than the set amount. Data from Kenya’s three CRBs — Metropol, TransUnion and Creditinfo International — shows that the accounts that were negatively listed had jumped from 2.7 million last year to 3.2 million in March. About a million of them were mostly linked to mobile digital loans of less than Sh1,000.