Hiding places for serial loan defaulters fast thinning out

Borrowers who fail to service their loans will soon find it hard to access financing in a new plan to have more lenders disclose information on debtors.

The Association of Kenya Credit Providers (AKCP) on Monday embarked on an expansion plan that is expected to more than double the number of financial institutions sharing information about borrowers by next year.

Under the five-year initiative, AKCP, which is the umbrella body for all credit providers in the country, expects to have about 800 institutions sharing data across the industry by 2019, up from the current 55.

Borrowers whose records are clean will benefit from cheaper loans since they are considered less risky.

“Today marks the start of the organisation’s concrete journey of providing a solid platform through which all credit providers in Kenya can actively engage in pursuit of a comprehensive credit information sharing mechanism,” CBK Governor Njuguna Ndung’u said when he launched the strategic plan on Monday.

The association said the move will create room for more Kenyans to access affordable credit — especially those in the informal and small and medium enterprises — based on their information, without resorting to the traditional collateral requirements.

“Any credit provider, regardless of regulatory status, will be able to share information with the market, and this will enrich the databases of the CRBs, allowing a 360-degree view of a borrowing customer,” said AKCP chairman Charles Ringera.

REPAYMENT BEHAVIOUR
About 55 institutions are currently sharing information since AKCP was established late last year. But it is still difficult for lenders to establish the repayment behaviour of individuals and businesses.

They include the 43 commercial banks, micro-finance institutions, the Higher Education Loans Board and the Agriculture Finance Corporation.

Lenders charge more on loans due to the lengthy background checks done on applicants, but the licensing of AKCP was meant to provide a one-stop shop from where information regarding defaulters and borrowers can be obtained.

Between September 2013 and August this year, a total of 1.6 million credit reports were requested by both lenders and individuals from the two licensed credit reference bureaus.

As more lending institutions share information on their full loan books, both positive and negative, AKCP targets to increase the number of reports requested annually to 8.4 million by the end of 2019, said Mr Ringera.

The five-year strategic plan aims to bring aboard all saccos — whose entry is in the final stages — utility firms, telcos, leasing companies and consumer credit companies, which will increase the credit reports.