The introduction of the CRB Regulations 2020 by the Central Bank of Kenya (CBK) in April 2020, right after COVID-19 was declared a pandemic, showcases the bank’s responsiveness. CBK’s swift move to address unknown and emerging risks in the credit market positions it as a true global leader in financial sector regulation. The recent global award it won for the DhowCSD, is another testimony to the CBKs astute position.
The CRB Regulations 2020 brought significant positive changes to data sharing and Credit Information Sharing (CIS) operations. For instance, individuals with non-performing loans below Ksh.1,000 were delisted. CRBs were mandated to issue free first-time Certificates of Clearance, and this targeted first-time job seekers. Furthermore, Savings and Credit Cooperative Organizations (SACCOs) were required to share credit information with CRBs, enhancing the positive data pool and boosting credit scores of borrowers. To mitigate the impact of the pandemic on borrowers, additional directives outside the regulations were issued.
One such mitigation was suspending negative listings for borrowers with loans that became nonperforming during the COVID period.
These changes aimed to provide relief to businesses and households who were affected by the pandemic.
Despite the positive intent behind the regulations and the directives, their implementation caused disruptions in the information sharing sector. The incomplete information compromised the ability of CRBs to compile comprehensive credit histories, affecting credit availability and pricing. This setback was unexpected, considering the industry’s efforts since 2008 to enhance the CIS mechanism and ensure full-file data coverage.
Further, some aspects of the regulations raised concerns among industry stakeholders regarding privacy and information industry standards. For example, the requirement for CRBs to disclose the names of institutions submitting default data on credit reports was deemed unnecessary for credit risk assessment.
Moving forward, stakeholders are looking forward to improvement in the regulatory framework to support risk-based pricing and enhance data protection compliance. Expansion of data points to cover more sectors and better consent management will promote open- banking and facilitate broader data sharing, benefiting borrowers and strengthening the financial sector. The industry is also ready to introduce Artificial Intelligence (AI) and machine learning-enabled tools in the mechanism.
If these are enabled through regulations, Kenya will again be the first in Africa to drive changes in financial services infrastructure. As we reflect on these developments, there is optimism for the future, with discussions already underway for potential regulations in the coming years. Knowing CBK’s agility, which has been consistently demonstrated, I expect to see draft CRB Regulations, 2025 anytime.
In conclusion, while the CRB Regulations 2020 continues to face many legal and operational challenges in implementation, it is celebrated for mainstream credit scores and underscoring the importance of data-driven decision making in lending. Through these regulations, CBK exemplified why there is need for regulatory frameworks to evolve with changing economic dynamics.
