Kenyans who have defaulted on loans below Ksh.5 million will be spared from being listed with Credit Reference Bureaus (CRBs) for one year to September 30, 2022.
The decision was part of President Uhuru Kenyatta’s 13-point economic revival plan that would protect most Kenyans from the economic headwinds exacerbated by the coronavirus pandemic.
Key targeted Kenyans are ones running small businesses that are still struggling to recover from COVID-19 shock waves.
“Some of the micro, small and medium enterprises (MSMEs) have struggled to get back to a sound footing following the adverse effects of the pandemic,” said President Kenyatta.
At the same time, borrowers of loans below Ksh.5 million already listed with CRBs form October 2020 to date will not have the listing incorporated in credit reports for the next 12 months.
According to President Kenyatta, the measures are geared at supporting credit disbursement to the private sector as the government steps up efforts to pump cash into an already ailing economy.
Banks will have to come up with a new accommodative loan restructures to cushion distressed borrowers.
“I also urge banks and financial institutions to accommodate customers who seek to restructure their banking facilities,” he said.
The government had suspended all new CRB listing between April and October last year while the Central Bank of Kenya (CBK) had directed banks to offer loan moratoriums to customers across a 12-month period from March 2020.
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The moratorium lapsed in October, allowing financial institutions to start sending names of defaulters to the bureaus. Lenders, however, offered defaulters 90 days from October 1 to start repaying their loans or get listed with CRBs.
The suspension of negative listing on Kenya’s three CRBs; Metropol, TransUnion and Creditinfo International — was meant to cushion distressed borrowers from the effects of the coronavirus pandemic.
During the window, banks restructured a total of Ksh.1.7 trillion restructuring representing an estimated 57 percent of their loan books – this is according to the CBK.
The number of loan defaulters listed with CRBs hit a high 14 million at the beginning of 2021 indicating increased distress by Kenyans.
Even so, banking sector non-performing loans (NPLs) have improved to 13.9 percent as of August 2021 pointing to the regularization of loan payments by borrowers in recent months.