Defaulters Risk Being Listed in CRBs After 6 Month Grace Period Expires


Defaulters risk to be listed in CRBs (Credit Reference Bureaus) after the 6-month freeze by the Central Bank expired yesterday.

Back in April, the Central Bank issued a release where they directed the suspension of listing of negative credit information for borrowers whose loans were performing previously but have become non-performing from April 1st 2020. This grace period was between April 1st and September 30th and the Central Bank hasn’t issued an extension so far.

This grace period was part of the stimulus package the CBK had put in place to cushion individuals and businesses from the adverse risk of the COVID-19 pandemic. During that time, there was a major fall in demand and emergency measures like curfews were placed which disrupted normal life for many Kenyans.

The expiry of the grace period now means that borrowers who have defaulted on their loans now risk being blacklisted, which further hurts their chances of being able to borrow.

The Credit Information Sharing Association is also concerned about this matter. “We are waiting for the CBK to provide guidance, the matter is in their hands. It cannot just happen automatically because some aspects of resumption need guidance,” Mr Getanga told the Business Daily.

Mr Getanga also said that the CBK will need to clarify whether the suspension on reporting of defaults occurring in the six-month period will be permanent or not.

Millions of Kenyans have been negatively listed with the CRBs in recent times thanks to digital loans which have risen in popularity in the past 5 years.

What has the CBK directed after the expiry?

The Central Bank has today communicated their directive after the expiry of the suspension of the listing of negative credit information for borrowers.

“If a loan is in arrears after 60 days from October 1, a financial institution will, in accordance with the existing procedures, give the borrowers notice of the intention to list them with the CRBs,” the Central Bank said in the notice. “If the loan hasn’t been regularized after the 30-day notice period, the financial institution will then list the non-performing loan with the CRBs,” they added.

They also touched on those loans that were performing before April 1 and subsequently went into arrears. These loans were not initially subject to the grace period like the ones mentioned above. The Central Bank says that these loans will have three months (until end December 2020) to regularize their loans before they are listed with CRBs.