Standard Chartered Kenya says it will use automated analysis to advance unsecured loans to households and SMEs, which most Kenyan banks have shunned since the onset of interest rate controls, citing their perceived high-risk levels.
StanChart head of retail banking David Idoru said yesterday the country’s fifth-largest lender by market share would track and analyse borrowers’ transactions dating back to 10 years, helping lock out those who do not meet its credit risk threshold.
Small and mid-sized enterprises, as well as households, have been hard hit following the September 2016 ceilings on loan charges at four percentage points above the Central Bank Rate, presently at 9.5 per cent.
“We continue lending in unsecured space …but with interest rate cap, we are cautious. We have invested a lot in technology and analytics and based on that, you can take a risk on certain kind of clients,” Mr Idoru said.
Most lenders in the risk-averse industry have suspended unsecured personal loans due to a perceived higher risk of default, exacerbated by higher impairment costs as a result of global accounting rules enforced last January.
The International Financial Reporting Standards 9 require banks to set aside cash for expected rather than incurred credit loss (as was previously the case under Central Bank of Kenya’s prudential guidelines) using historical loan repayment record of the borrower.
StanChart went against the grain in August last year offering to lend Sh10 billion in unsecured personal loans in a 45-day campaign through mid-October whose uptake Mr Idoru described as “extremely good”.
“Because we have been keeping this (credit) data for 10 years, we can see the age, the company the person works for and the credit reference bureau data,” he said.
“A combination of these factors will show that a client of this age working for such an organisation will have a lower loan default risk.”
Non-performing loans in the industry have risen steadily from 4.4 per cent of gross loans in 2011 to 9.2 per cent in 2016 and 10.6 per cent last year, the Central Bank statistics show.
Mr Idoru spoke after StanChart announced a partnership with card payments giant Visa to extend its loyalty points reward scheme, which has been available to credit cardholders for the last two years, to clients using automated teller machine (ATM) cards for shopping.
The rebranded scheme, dubbed 360° Rewards, is seen as a medium-term strategy to cut operating costs for additional ATMs by driving cashless transactions.
For every Sh100 spent on shopping the customers earn a point, which they will accumulate and redeem for a shopping voucher at selected stores.
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