CBK data reveals how poll jitters hit loan requests

The number of requests to Credit Reference Bureaus (CRBs) for the credit history of borrowers dipped for the first time since 2017. FILE PHOTO | SHUTTERSTOCK

The number of requests to Credit Reference Bureaus (CRBs) for the credit history of borrowers dipped for the first time since 2017 highlighting rising jitters by lenders during the electioneering period.

A banking supervision report shows banking requests to CRBs declined three percent to 37.52 million last year from 38.66 million in 2021.

The Central Bank of Kenya (CBK) attributed the fall to reluctance by lenders to give loans amid economic uncertainty linked to last year’s General Elections.

The last time banks’ requests to CRBs dropped in at least eight years was in 2017 when Kenya held General Elections with inquiries falling 11 percent to 4.4 million from 4.94 million in 2016.

“The decrease in credit reports requests in 2022 can be attributed to the “wait and see” effect in the lead-up to the General elections of August 2022,” CBK says in the report released on Monday.

Banks tend to slow down on giving loans towards the peak of elections and after mainly due to economic disruptions as a result of disputed poll results that inevitably hurt the ability of borrowers to repay.

CRB requests from banks averaged 2.7 million per month in the first seven months to July before shooting to 3.6 million after the conclusion of the election.

President William Ruto narrowly defeated Raila Odinga in the August polls and was sworn to office the following month, with the peaceful political transition significantly boosting the economy.

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After the election, banks loosened their purse strings which led to an increase in advances.

December topped the monthly requests with 5.4 million inquiries to CRBs highlighting increased demand for credit.

The jump in requests in December came at a time when wholesalers and manufacturers who provide goods on credit turned to CRBs to weed out rogue retailers who fail to pay for delivered consignments.

Banks rely on CRB reports to weigh the creditworthiness of borrowers as a critical factor in determining the risk involved.

Metropol, TransUnion and Creditinfo International are the three licensed CRBs in Kenya, playing a key role in helping banks assign risk factors to borrowers.

Positive listing at any of the CRBs boosts the creditworthiness of a borrower while negative listing significantly hampers access to credit.

Negatively listed borrowers can be locked out of credit or given loans at high-interest rates, highlighting banks’ reluctance to lend to them.

CBK last year rolled out a credit repair scheme in a bid to free some 4.2 million borrowers from black books for defaulting on mobile loans amid the economic turmoil for the past two years.

The banking regulator says a majority of borrowers were unable to repay their loans due to the economic fallout of the Coronavirus pandemic, which was marked by job losses and the closure of some businesses.

The programme will give businesses and individuals a chance to restore their credit scores before its expiry at the end of this month.

The number of individuals seeking to know their creditworthiness last year also dipped due to election uncertainties.

CBK data shows individual requests fell 17 percent to 951,740 from 1.15 million in 2021, marking the first drop in at least eight years.

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Kenyans check their creditworthiness from any of the three CRBs and those with non-performing loans get flagged.

Some employers use the certificate as a means of building the profile of potential employees.

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