President William Ruto’s decision to reform the Credit Reference Bureau (CRB) framework has elicited varied reactions from financial professionals, with the majority predicting credit hoarding.
During his inauguration ceremony on Tuesday, Ruto described the present CRB structure as arbitrary and punishing, claiming that it has prevented many borrowers from obtaining credit.
“Our starting point is to shift the CRB framework from its current practice of arbitrary, punitive, all or nothing blacklisting of borrowers that denies borrowers credit,” Ruto said.
He instead proposes a new system of credit score ratings that allows debtors to regulate their creditworthiness.
Nonetheless, bankers are concerned that such a strategy may result in large loan defaults, prompting banks to be extra careful when lending.
Ruto’s words, according to a senior official at the Kenya Bankers Association (KBA) who requested anonymity owing to the delicacy of the matter, are “corrosive” to the banking industry.
”Most borrowers are likely to misinterpret the President’s speech, worsening the current loan default situation in the country. It is also likely to see banks become extra cautious, limiting credit flow,” he said.
He added that the last time the country lifted credit listing as a Covid-19 relief measure, non-performing loans hit the roof, hurting banks’ books.
