Banks Guarantee New Customer Loans Amidst CRB Listing Freeze

 

By Kepha Muiruri For Citizen Digital

Commercial banks do not expect a step down in new credit disbursements even after the reintroduction of a CRB listing freeze.

According to Kenya Bankers Association (KBA) Chairman and NCBA Group Managing Director John Gachora, the re-entry of the freeze does not limit the ability of lender’s to assess customers’ creditworthiness.

“You will not hear any bank saying there will be a freeze on lending. We shall continue to lend. There are very many other data points that we use to assess the ability to repay,” he said.

“This is not the first time that there has been such a freeze in CRB reporting. One must not forget that about 10 years ago, there was no CRB and people still borrowed.”

During the Mashujaa Day celebrations last month, President Uhuru Kenyatta announced the return of the CRB listing freeze covering borrowers with loans not exceeding Ksh.5 million.

Borrowers who fall into arrears on repayments between October 1, 2021, and September 30, 2022, will not be ‘blacklisted’ on CRBs while the bureaus are barred from including in any credit report, any negative credit information for loans less than Ksh.5 million and submitted to CRBs between October 1, 2020, and September 30, 2021.

In contrast, digital lenders have suspended issuing new loans outside their established database of borrowers citing the continued freezeout of CRBs.

Earlier this month, the Central Bank of Kenya (CBK) warned of the directive’s potential impact on new lending as financiers hit a wall in credit assessment.

“This suspension could adversely impact the provision of credit by banks to the target group, as they will be unable to distinguish between the good and bad borrowers during the suspension period,” the CBK said on November 8.

While CRBs remain part of critical infrastructure to the borrowing cog, NCBA’s Group Director for its digital business says the previous freeze which ran between April 1 and September 30 last year did not lead to a notable drop in new credit decline.

“There was no significant impact on the volume of loans that continued to be repaid or customers’ attitudes towards repayments,” he said.

“The CRB is an important infrastructure with regard to helping us improve our accuracy when making a lending decision. It’s however not a binary- Yes or No decision- it just adds the profile of the data set that we have.”

The non-change in credit disbursed during the listings freeze is collaborated by data from the CBK.

For instance, private sector credit growth in 12 months through to September 2020 stood at 7.6 per cent and at 7.1 per cent in September 2021 mirroring the largely unchanged volumes of new credit disbursed to households and businesses.