Banks want information sharing platform to take all creditors aboard

Kenya Bankers Association (KBA) chairman Joshua Oigara. PHOTO | FILE 

By LYNET IGADWAH

Kenyan banks are pushing for inclusion of all creditors in credit information sharing (CIC) to help bring down the cost of loans. The current law limits the scope of information shared with banks, microfinance institutions and saccos.

Non-bank loan providers, telephone companies and utility firms including Kenya Power Company, a host of water supply companies and the Higher Education Loans Board are among the largest creditors in the country.

Kenya Bankers Association (KBA) chairman Joshua Oigara told Parliament that a review of the law would help provide sufficient information which could remove the need for collateral.

“With all lenders fully participating in the CIS framework, creditors will have the total picture of a customer and therefore can reward good borrowers with low interest rates,” he said.

Mr Oigara made the remarks when KBA officials appeared before the National Assembly Committee on Finance Planning and Trade to discuss challenges facing the banking sector. Mr Oigara asked Parliament to support the KBA proposal on credit information sharing mechanisms.

“For Kenyans to benefit fully from the CIS framework and access preferential loan interest rates, it is imperative that all lenders (banks, saccos, microfinance institutions and non-bank credit providers) are mandated by law to fully share file information on borrowers,” he said.

Previous Central Bank of Kenya guidelines required banks to provide information relating to loan defaults to credit reference bureaus but have since allowed sharing of positive information.

READ: Rotich asks lenders to cut rates for good mobile loan clients

Mr Oigara further warned against capping interest rates saying this will limit access to credit for most Kenyans.

“Large companies and the rich will be the only borrowers benefiting from the proposed controls on interest rates,” he said.

In March Treasury Secretary Henry Rotich opposed plans by MPs to cap interest rates at four percent above the CBK rate. Mr Rotich said that the move would erode gains made in financial inclusion.

“If you fix it banks will check and look for people with high credit scores and lock out those with poor credit records,” he told the National Assembly Liaison Committee.

There has been a push to regulate borrowing rates since the late 1990s starting with the Donde Bill which became an Act of Parliament but was never effected.
It was privately pushed through by former Gem MP Joe Donde