Kenya leads region in loan access

Kenya’s financial sector offers the easiest access to loans in the region, a new World Bank report shows, underpinning the country’s ambition to establish its footprint as the financial hub in the East African Community.

Dubbed Doing Business in the East African Community 2013, the study places Kenya at the 12th position among the countries offering the easiest access to credit services worldwide, ahead of EAC’s other four member states.

The report attributes the improved access to credit in the country to the Banking (Credit Reference Bureau) Regulations 2008 passed in February 2009.

Credit information

“The new law made it mandatory for financial institutions licensed under the Banking Act to share negative information on their customers with licensed bureaus,” the report, which covers the eight-year period between 2005 and 2012, reads in part.

The ranking is based on the sum of the strength of legal rights index and the depth of credit information available, parameters in which Kenya posted good performance.

However, the Bretton Woods institution ranks Kenya fourth in the region and 126th globally in as far as starting a business is concerned.

Rwanda still has the most efficient process in the region to start a business, with a global ranking of eight, followed by Burundi at 28, Tanzania at 113 and Uganda at 144.

Although the report says that the East African Community (EAC) member states have made a lot of progress in implementing regulatory reforms, Kenya leads in the ease of accessing credit with Rwanda ranked at 23, Tanzania at 129, Uganda at 40 and Burundi at 167 globally.

Private sector expansion

“The report’s findings can be used to identify areas to improve the business environment in the EAC along with enabling the expansion of the private sector, the main driver of growth and job creation,” Mr David Bridgman, manager, Investment Climate Africa, IFC/World Bank Group, said in a statement.

In 2010, commercial banks agreed to share customers’ credit information in a joint effort to tackle the high rate of loan defaults mainly perpetuated by borrowers who migrated from one financial institution to another, acquiring loans with no intention of repaying.

In the region, Kenya is also the best performer in issuing construction permits. The report ranks Rwanda as the best performer on starting a business, getting electricity, registering property, protecting investors and paying taxes. Tanzania, on the other hand, is the best performer on enforcing contracts and trading across border, while Uganda is the best performer on resolving insolvency.