CBK calls for uniform credit score formula
What you need to know:
- Central Bank Governor Patrick Njoroge says the mechanisms for determining an individual’s credit score should be harmonised.
- Kenyans have faced the torment of being blacklisted by one CRB while being given a clean bill of health by another due to differing formulas for reviewing credit scores, resulting in banks denying loans on this basis.
Central Bank Governor Patrick Njoroge has expressed concern over confusion in credit circles that has seen Kenya’s three licensed bureaus use different formulations to assess borrowers’ risk.
While addressing a three-day regional conference on credit information sharing in Nairobi on Monday, the regulator boss said the mechanisms for determining an individual’s credit score should be harmonised.
“Credible data will help lenders trust CRBs (credit reference bureaus) in gauging a borrower’s credit score based on an updated credit history of the borrower. Good guys (borrowers) should benefit from risk-based credit pricing and this requires us to have a robust real-time credit history processing platform,” Dr Njoroge said, adding that the move would enhance authenticity of reports submitted to banks on a borrower’ credit score.
Kenyans have faced the torment of being blacklisted by one CRB while being given a clean bill of health by another due to differing formulas for reviewing credit scores, resulting in banks denying loans on this basis.
Saying all lenders should avail borrowers’ data to the CIS (credit information sharing) platform, Dr Njoroge said the CBK was formulating a mechanism where a central server for financial technology firms (fintech) riding on the mobile phone platforms will facilitate submission of client credit information for uploading.
This would help CRBs rightly determine a borrower’s credit score from all available credit data. It could also end the mobile lender‘s woes where some Kenyans borrow money from different mobile lenders with no intention of repaying them same.
He said lenders’ practice of determining a borrower’s suitability to access credit services in-house was outdated and urged them to hire data scientists whose role will be to help banks understand Kenyans’ borrowing habits enabling formulation of innovative loan products that the market wants.
Dr Njoroge also warned CRBs against breaching customer privacy saying CIS must facilitate the processing of credit data for specific purposes as requested by lenders. “Integrity is central to how the credit information system handles customer data. This is not just about protection from external hackers, but also from internal misuse,” he said.
