The Credit Reference Bureau (CRB) listing freeze on new loan defaulters of sums below Sh5 million could hinder the implementation of risk-based lending, bankers have said.
The Kenya Bankers Association (KBA) chief executive Habil Olaka said this in a commentary supporting the new credit pricing model favoured by industry players amid opposition from some financial analysts.
“The implementation of the model could be temporarily hit by the stay of a moratorium on CRB listings for borrowers which stays until October this year,” Olaka said.
The directive by the CBK in November last year followed a presidential order on October 20, 2021, as the government sought to ease availability of credit to the private sector as part of the Covid-19 recovery stimulus package.
”Borrowers with loans below Sh5 million that were performing but fell into default after October 1 this year and those who fall into default between now and September 2022 will not be listed with CRB,” CBK governor said in a directive dated November 2, 2021.
The order also barred financial institutions to use ‘blacklisted reports’ dated between October 1, 2020, and September 30 last year in assessing borrowers’ creditworthiness.
KBA’s concern comes at a time when CBK has so far approved risk-based lending pricing models for six commercial banks among them Equity Bank.
Yesterday, Olaka told the Star that approvals are between individual lenders and the regulator, adding that Bank of Baroda, Bank of Africa, Victoria Bank, Bank of India and Acess Bank had applied for approval.
“The six banks had received their approval by end of March. Since the process is gradual, there is no definite date for CBK to approve proposals from each bank,” Olaka said.
The six lenders hold 18.4 per cent of the banking industry’s gross private-sector loans.”We want to reward our customers based on their borrowing profiles. We anticipate CBK to approve our pricing model in a week’s time,” Oigara said.