KIAMBU, Kenya, November 15 – The Central Bank of Kenya CBK has urged the public to meet payment obligations on its credit facilities as they come due.
This, according to the CBK, will allow them to build up a good credit history based on their payment behavior and thus obtain loans at better rates.
In a press release on Monday announcing the rollout of a credit repair framework by commercial banks, microfinance banks and mortgage finance companies, the CBK said that when borrowers find it difficult to repay their loans, they should proactively engage their lenders.
The framework aims to improve the creditworthiness of digital mobile phone borrowers whose loans are non-performing and have been reported as such to credit reference bureaus (CRBs).
According to the statement, the CBK indicates that the limited framework will expire on May 31, 2023 and that the institutions concerned will contact their eligible borrowers to provide them with further details on the framework.
“Through the framework, institutions will offer a discount of at least fifty percent
outstanding outstanding mobile telephony digital credits at the end of October 2022,
and update the borrower’s creditworthiness from non-performing to performing,” the statement read.
The institutions, according to the CBK, will then enter into a repayment plan with the borrowers for a period up to May 31, 2023, for the balance of the loan and upon the expiry of the framework, the creditworthiness of the borrowers with respect to these loans will be dependent on their repayment
Performance over the six-month period.
The framework will also cover loans with a repayment period of 30 days or less that have been offered by these institutions via mobile phones. It is intended that the Framework
will enable more than 4.2 million digital mobile phone borrowers, who are rated in disfavor with the CRBs, to restore their creditworthiness.
The total value is about 30 billion shillings, or 0.8% of the banking sector’s gross loan portfolio of 3.6 trillion shillings at the end of October 2022.
Borrowers covered by the framework are primarily from the retail and microenterprise sectors and have been impacted by the COVID-19 pandemic, either through job loss and the closure of their microenterprises
The adverse effects of the pandemic continue to linger for covered borrowers and therefore the framework should enable this segment of borrowers to access credit and other financial services as they rebuild their lives and their means. of subsistence.