A legislator has initiated the process of scrapping the law that has seen hundreds of thousands of borrowers listed for defaulting on small loans with the Credit Reference Bureau (CRB).
Belgut Member of Parliament Nelson Koech says it is unfair for lenders to treat defaulters of billions of shillings the same way as those who have borrowed Sh100 from mobile loan providers such as CBA’s Mshwari and Tala.
“Why would a defaulter of Sh1 billion loan be treated the same way as that of a loan on Mshwari? We also do not see why employers should be using the CRB as part of the employment process and this must be scrapped,” Mr Koech said in an interview with the Nation.
“I propose to have the enabling provisions for the CRB listing repealed. We will then come up with a new bill that will have amendments to see us operate like the United Kingdom where you are not listed but your credit worthiness is rated and given points,” Mr Koech said adding that he has written to the Speaker of the National Assembly to begin the process.
In his letter, Mr Koech argues that listing by lending institutions through the CRB is stifling growth among youth.
“Lending institutions should resort to the conventional means of recovering their debts without sharing information of borrowers to non-parties. The practice of sharing borrower’s information with listing claims of as low as Sh100 has denied growth to enterprising youth,” the letter reads.
The move will be a big blow for lenders if his proposals see the light of day given that listing of defaulters had given banks a platform to check risky clients.
Recent data shows that more than half a million Kenyans have been blacklisted by the CRB up from 150,000 three years ago.
Transunion Credit Reference Bureau, one of the CRBs in the country, said the number of those blacklisted had gone up due to many mobile applications providing loans.
Kenya has about 50 mobile phone loaning apps hawking credit to anyone with a phone.