CBK accuses banks of seeing one side of the coin on credit ratings

Wednesday February 24 2016

Central Bank Governor Dr Patrick Njoroge (Centre) flanked by CBK directors Gerald Nyaoma (Left) and Charles Koori (Right) during a Senate Finance Committee hearing on July 27, 2015. CBK may be forced to increase the benchmark lending rate later this month. PHOTO | DIANA NGILA | NATION MEDIA GROUP

Central Bank Governor Dr Patrick Njoroge (Centre) flanked by CBK directors Gerald Nyaoma (Left) and Charles Koori (Right) during a Senate Finance Committee hearing on July 27, 2015. PHOTO | DIANA NGILA | NATION MEDIA GROUP 

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The Central Bank of Kenya Tuesday accused commercial banks of failing to pass on the benefits of credit information sharing to their customers.

Governor Patrick Njoroge said customers with a good rating history deserve to be rewarded with lower interest rates on loans.

Dr Njoroge addressed bankers at the opening of a high-level regional credit information sharing conference in Nairobi. He castigated some lenders, saying “they are quick to inform consumers when their credit profile is poor, but are mute when the score is good”.

“Consequently, borrowers only know about the credit bureau when there is a problem. This needs to change. Banks in Kenya have been sharing positive data for two years now, and therefore must begin to inform and reward their low risk customers with better terms,” said the governor.

He said transparency in pricing of credit by commercial banks and other financial institutions “cannot be over emphasised” citing the recent move by the regulator to publicise data on fees charged on loans by lenders.

“It is in this regard that the Central Bank of Kenya has started publishing the average lending rates for various loan products as well as the overall average weighted lending rates by commercial banks. This will enable the borrowing public to make informed decisions, which in turn will facilitate a competitive banking sector with high quality and reasonably priced products,” said Dr Njoroge.

He told banks to address consumer complaints associated with credit information as promptly as possible. “Where these issues escalate to disputes, lenders should explore alternative dispute resolution mechanisms,” he said.


At the same time, he said banks must be willing to invest in efforts to ensure highest standards of data quality.

“This is important because a borrower’s credit report is a score-card on the character of individuals and corporates. It is imperative that every effort is made to provide accurate and updated information on each of their customers, without regard to status or social standing,” he said.

Dr Njoroge said the regulator would monitor compliance with information sharing conference reporting requirements by banks “given that sharing comprehensive information on a timely basis is the only way this mechanism can reach its full potential.”

“Having an inclusive financial sector goes beyond mere access to financial services to include consumer protection and making sure that the duty of care owed by financial institutions to their customers is well executed. In addition, the provision of sufficient information to assist consumers in making informed financial decisions is a fundamental enabler in enhancing financial inclusion,” said Dr Njoroge.

The conference has attracted stakeholders and experts from around the world.

Kenya attained enhanced rankings in the World Bank Doing Business Report, 2016. In the Ease of Getting Credit Indicator, it emerged 28th globally. This was a significant improvement from position 118 in 2015.