PHOTO | FILE Metropol Credit Bureau MD Sam Omukoko during a past event.
Mr Omukoko says limited information on borrowers continues to hamper
the assessment of the actual credit rating of customers.
NATION MEDIA GROUP
Scant data on borrowers’ credit profiles continues to hamper efforts extend favourable borrowing terms to borrowers.
According
to Metropol East Africa managing director, Mr Sam Omukoko says limited
information on borrowers continues to hamper the assessment of the
actual credit rating of customers with the view to rate them in a way
that enables those with high quality credit profiles to get preferential
treatment while borrowing.
The law only mandates
banks and deposit taking microfinance institutions (MFIs) to provide
credit information to the credit bureaus. The credit sharing mechanism
excludes other key institutions that include credit only MFIs,
development finance institutions (DFIs), Saccos telecoms and
manufacturing firms, a process that has made it difficult to enable full
disclosure of borrowers credit profile.
The credit
bureaus are now casting the net wider to incorporate the DFIs, credit
only MFIs, Saccos, Utility providers, Telcos and manufacturing firms
particularly in the SME sector in the delivery of information on their
clients.
“The more data you have on your profile, the
easier it becomes for us to calculate the risk or the creditworthiness
for you as customers,” he said.
The Q-Score
He
was speaking while unveiling new systems of determining credit
information. One of the ways is the use of the Q-Score that has a
ranking of 10 and 100. A Q-Score or 10 denotes least information
available on the customer while 100 indicates sufficient information
available on the customer. This is the measure of the amount of data
that consumer has on their profile.
The Q-Score is
derived from the amount of an individual’s bio data, identity, contact,
employment and credit performance information. The credit performance
data may also be provided by banks, MFIs, Saccos, utility firms and even
the Higher Education Loans Board (Helb).
The Q-Score
is now being used to determine the credit score which has a rating scale
of 200 (defaulter with very poor credit quality) to 900 (highest credit
quality with lowest risk).
According to Mr Omukoko,
the average scores that are coming in are between 550 and 650. A credit
score below 400 means the customer is a defaulter and hence is
categorised as a risky borrower.
“This means that we
still have to collect a lot more data for us to see the length of credit
history, the number of loans people have been taking to be able to
build this profile to be able to get people into the 800 range. Any
score above 750 is a very good score. Once you hit a score of 750 and
above then you are eligible to start getting preferential treatment from
any lender that you approach,” Mr. Omukoko noted.
The
Q-Score and other related scores will be available from August 15. This
will run constitute over six months of both positive and negative
information.
The Kenya Credit Information Sharing
Initiative was started in 2009 by the Kenya Bankers Association (KBA)
and the Central Bank of Kenya (CBK) to facilitate sharing of information
on the profile of borrowers. Whereas the initiative began with a focus
on negative information, the positive information has been made
available since February this year.
Individuals,
however, can now enter their information especially on contact, identity
and employment details to enable the credit bureaus to assess borrowing
profiles. The credit data can however, be provided by the providers
only.
“When there’s enough information on a customer’s
profile, we can then be able to run a risk analysis on that customer’s
profile and generate a measure that assesses the creditworthiness of the
customer,” Mr. Omukoko.
“We may find that if a
customer does not have enough information on their credit profile, then
they will have a very low Q-Score. Therefore, you will be disadvantaged
in engaging the bank to negotiate any good rates or better terms that
you deserve”.
The Cost of Credit Committee is also
among other things exploring the initiative of expanding credit
information sharing beyond KBA member banks to all regulated banks and
other players including non-bank credit providers, utilities and mobile
network operators.
According to CBK governor, Njuguna
Ndung’u, borrowers with a poor credit profile can negotiate with their
lenders to see how they can improve their rating.
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