Lenders and borrowers have been advised to take advantage and leverage on the Credit Reference Bureau (CRB) ratings while giving out or applying for loans.
Due to the negative effects of the COVID-19 pandemic, households’ and businesses’ earnings have been reduced affecting their ability to repay loans.
According to the Kenya Bankers Association’s (KBA) State of the Banking Industry (SBI) Report 2021, Non-Performing Loans (NPLs) in the banking sector went up to Ksh.433.7 billion in 2020 compared to Ksh.334.3 billion in 2019.
Speaking during a Co-operative Bank SME webinar, Metropol Corporation General Managing Director Sam Omukoko said through the Metropol CRB mechanism, banks, SACCOS and microfinance institutions are able to know which loans are likely to default through credit ratings.
“The credit scores and the credit history on your profile are about your past. It’s showing loans that you have taken and how you’ve behaved with those loans. To be able to predict how you’ll behave in future another metric which is a rating is required to supplement the credit information that is on the file,” said Omukoko.
With credit ratings now taking shape in the country as more businesses begin to embrace the ratings, Metropol CRB has so far rated over 800 small businesses and a number of large corporations that can use the ratings to negotiate for the appropriate interest rates that fit their profiles.
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“Every time that you want to apply for a loan do understand that lenders will check your credit profile and will also get your credit score. So it’s important that as a business you check that your credit score does reflect the performance of the credit facilities that you have been taking,” added Omukoko.
Present during the Webinar was Co-operative Bank’s Head of Business Banking Department Moses Gitau who warned borrowers against over-borrowing and multiple borrowing that is likely to lead to default or late loan repayment.
This behaviour, he said, lowers customer’s ratings that might limit access to loans.
“As a customer when you’re applying for a loan, the purpose must come out very clearly. Identify and quantify the needs and this will help you as a customer in terms of saying this is my need and this is the much I need to my capacity. That gives you a good repayment history that helps you in terms of improving the credit score,” said Gitau.
Credit rating for all businesses from micro, small, medium and large corporates can be obtained from Metropol CRB for as low as KSh.5,000 to Ksh.15,000 that is valid for 12 months.
