The Central Bank of Kenya (CBK) has given mobile loan defaulters who have been blacklisted until May 31, 2023 to clear outstanding debt with financial lenders in order to repair their credit profiles.
This follows the rollout of the Credit Repair Framework by commercial banks, microfinance banks and mortgage finance companies which targets 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).
According CBK, the total value of outstanding loans is approximately Ksh 30 billion, equivalent to 0.8pc of the gross banking sector loan portfolio of Ksh.3.6 trillion at the end of October 2022.
“Through the Framework, the institutions will provide a discount of at least 50pc of the non-performing mobile phone digital loans outstanding as at end October 2022, and update the borrowers credit standing from non-performing to performing,” said CBK.
The regulator expects financial institutions to then enter into a repayment plan with the borrowers for a period up to May 31, 2023, for the balance of the loan.
The framework targets loans with a repayment period of 30 days or less and which were
offered by the financial institutions through mobile phones.
“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,” added CBK.
CBK says the borrowers covered in the framework are mainly in the personal and microenterprises sectors whose livelihoods were affected either through job losses or business closures during the COVID-19 pandemic.
Individuals and businesses who will benefit from the framework are expected to begin accessing credit and other financial services which they have been locked out of due to bad credit profile.
The Kenya Kwanza administration has been critical of blacklisting of borrowers by CRBs with President William Ruto promising to review the mechanism and make it less punitive.
