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The Central Bank of Kenya (CBK) has barred unregulated digital mobile lenders from blacklisting the names of loan defaulters to credit reference bureaus (CRBs).
The regulator has further stopped the blacklisting of borrowers owing less than KSh1,000.
“With immediate effect, CBK has withdrawn the approvals granted to unregulated digital (mobile-based) and credit-only lenders as third party credit information providers to CRBs.”
“The withdrawal is in response to numerous public complaints over misuse of the CIS (credit information sharing) by unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints,” CBK said in a statement Tuesday.
“Consequently, loans that fall in arrears from April 1 to September 30, 2020, will not lead to the “blacklisting” of the borrower on the CRBs,” says the Central Bank.
The CBK said the revised CRB Regulations have been developed through a consultative process that started in 2018, and are intended to strengthen Kenya’s Credit Information Sharing System (CIS) that has been operational since 2010.
This means commercial banks, microfinance banks, Savings and Credit Societies (SACCOs), other credit information providers approved by CBK, will be allowed to blacklist defaulters with CRBs in the country.
However, digital lenders like Tala and Branch have been locked out.
“In particular, they seek to enhance consumer protection for borrowers, expand the sources of information and ensure the sustainability of the CIS as a key tool to bridge the information gap about the borrower’s creditworthiness,” says the regulator.
Apps that are already regulated by CBK include M-shwari, Fuliza, KCB-Mpesa, Stawi for SMEs and other online financial products offered by local commercial banks.
First-time CRBs clearance services will now be issued at no cost while SACCO societies are now included as authorized subscribers of credit data to CRBs.
READ:
- Kenya’s Digital Lenders Mull at Self Regulation
- With The Rise of Mobile Loans, We Need to Go Back to Basics
