CBK bars 337 digital lenders from blacklisting loan defaulters with CRB

OKash. [Photo by TechCabal]

Kenya’s Credit Reference Bureaus (CRBs) have dropped 337 digital mobile lenders and micro financiers from submitting details of loan defaulters in their platforms.

This, the Central Bank of Kenya says is because the digital lenders are unregulated. Data shows that financial institutions allowed to blacklist defaulters dropped to 2,254 in September from 2,332 in May last year.

Now, Tala, Branch, Okash among others cannot forward the names of defaulters to Kenyan CRBs namely Metropol, TransUnion and Creditinfo International.

This is a huge blow as the decision comes at a time when many people have borrowed heavily due to the coronavirus pandemic.

It also comes against spirited calls from the pubic to regulate the sector following numerous complaints by Kenyans that these platforms were misusing the credit information sharing (CIS) mechanism.

“The withdrawal is in response to numerous public complaints over misuse of the CIS (credit information sharing) by unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints,” the CBK said in an earlier statement.

Under the new rules, only defaults above Sh1,000 will be shared with CRBs. Borrowers who had been blacklisted for lower amounts will also be cleared unconditionally.

CBK data showed that there were 3.2 million Kenyan blacklisted in 2020, a number that rose from 2.7 million in 2019.

A huge chunk of the 3.2 blacklisted Kenyans had defaulted on amounts less than Ksh1,000.

The cruel methods used by the lending apps to force defaulters to pay back what they owe them and huge interests rates are some of the factors that CBK took into consideration in making the decision.