The banking sector regulator has asked lenders including microfinance banks and mortgage finance companies to provide a discount of at least 50 per cent of the non-performing mobile-phone digital loans outstanding as of the end of October 2022.
Borrowers covered in the write-offs will have their credit standing upgraded to performing from non-performing.
“The institution will then enter into a repayment plan with the borrowers for a period up to May 1, 2023, for the balance of the loan. Upon expiry of the framework, the credit standing of the borrowers with respect to these loans will depend on their repayment performance during the six-month period,” the CBK stated.
“The framework seeks to improve the credit standing of mobile phone digital borrowers whose loans are non-performing and have been reported as such to Credit Reference Bureaus (CRBs).”
The write-off exercise is expected to cover loans with a repayment period of 30 days or less, and which were offered by lenders through mobile phones.
“It is anticipated that the framework will enable over 4.2 million mobile phone digital borrowers, adversely listed with CRBs, to repair their credit standing. The total value is approximately Ksh.30 billion, equivalent to 0.8 per cent of the gross banking sector loan portfolio of Ksh.3.6 trillion at end October 2022,” the CBK added.
The credit repair framework has been described by the CBK as additional initiatives to support the recovery of businesses and households from the elongated effects of the COVID-19 pandemic.
Previously, the CBK had directed banks to restructure the repayment of credit facilities to include extension to payments by borrowers.
At the same time, the credit repair framework is part of initiatives to overhaul the credit information sharing (CIS) mechanism.
On Friday for instance, the CBK asked banks to reduce their reliance of CRB listings in approving loans.
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