Banks get CBK's nod to start blacklisting loan defaulters at CRBs

 

Banks get CBK's nod to start blacklisting loan defaulters at CRBs

Thursday October 01 2020

CBK Governor Patrick Njoroge. FILE PHOTO | NMG

By OTIATO GUGUYU
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Summary

• CBK governor Patrick Njoroge Wednesday gave the banks the green light to blacklist borrowers who have defaulted in the wake of the coronavirus economic fallout.
• But the defaulters look set to appear in the books of Kenya’s three CRBs — Metropol, TransUnion and Creditinfo International—from January after the expiry of the 90-day notice.
• The CBK announced the suspension of CRB listing for loans that were defaulted after April 1, and the relief was to last for six months to September 30.

The Central Bank of Kenya (CBK) has opted not to extend the six-month freeze for listing loan defaulters with credit reference bureaus (CRBs), paving the way for blacklisting of thousands of borrowers from today.

CBK governor Patrick Njoroge Wednesday gave the banks the green light to blacklist borrowers who have defaulted in the wake of the coronavirus economic fallout.

But the defaulters look set to appear in the books of Kenya’s three CRBs — Metropol, TransUnion and Creditinfo International—from January after the expiry of the 90-day notice.

The CBK announced the suspension of CRB listing for loans that were defaulted after April 1, and the relief was to last for six months to September 30.

The CRB listing relief was part of a stimulus package announced on March 25 to cushion distressed businesses and households from the effects of the coronavirus pandemic, which has hit consumer demand and forced businesses to shed jobs and cut back their operations.

The end of the CRB listing freeze comes at a time when the banking sector is struggling with mounting unpaid loans whose share has risen to the highest level since August 2007.

“The point here is to emphasise we are going back to the normal operations, the way things used to happen and that’s where we will be from October 1,” Dr Njoroge said in reference to the listing moratorium deadline.

“And there is a process there they will indicate if let’s say you have not paid loans, you have 60 days, they will indicate that to you firmly… They will give you 30 days so you have three months to regularise whatever you had not paid.”

More than 3.2 million Kenyans were negatively listed as loan defaulters with the CRBs before the outbreak in an economy where job cuts and near-stagnant wages have left thousands of people in a debt trap.

Data from the CRBs shows that the accounts negatively listed has jumped from 2.7 million last year, most of them linked to mobile digital borrowers.

The default rates have jumped in the wake of the coronavirus outbreak. This could increase the number of defaulters reported to Kenya’s three CRBs.

STRINGENT MEASURES

Workers and businesses defaulted on loans worth Sh30 billion in the four months to June when Kenya imposed stringent measures to contain the spread of the coronavirus.

The non-performing loans (NPLs) growth emerged in a period when Kenyans deferred payments on nearly a third of the banks’ total loans. This is a pointer that defaults — which is credit that remains unpaid for more than 90 days — could have been worse without the credit rescheduling.

The ratio of NPLs rose from 12.7 per cent in February to 13.6 per cent in August— the highest since August 2007 when it stood at 14.41 per cent.

Industries and other businesses have since cut down on their activities in response to the infectious disease, leading to job cuts and unpaid leave for retained staff as profitable firms move into losses.

This has seen workers who had tapped mortgages and unsecured loans for purchase of goods such as furniture and cars and expenses like school fees default. Unsecured loans are given on the strength of one’s salary.

Firms that had borrowed based on the forecast of cash flows have also been struggling to repay their bank loans.