The Central Bank of Kenya (CBK) has today announced the rollout of a Credit Repair Framework by commercial banks, microfinance banks and mortgage finance companies.
The Framework seeks to improve the credit standing of mobile phone digital borrowers whose loans are non-performing and have been reported to the Credit Reference Bureaus (CRBs).
“Through the Framework, the institutions will provide a discount of at least fifty percent of the non-performing mobile phone digital loans outstanding as at the end of October 2022 and update the borrowers credit standing from non-performing to performing,” said CBK in a press statement.
The institutions will enter into a repayment plan with the borrowers for a period up to May 31, 2023, for the balance of the loan. Upon the expiry of the Framework on May 31, 2023, the credit standing of the borrowers with respect to these loans will depend on their repayment performance during the six-month period.
The new Framework will cover loans with a repayment period of 30 days or less and were offered by institutions through mobile phones.
According to CBK, It is anticipated that the Framework will enable over 4.2 million mobile phone digital borrowers, adversely listed with CRBs, to repair their credit standing. The total value is approximately Ksh.30 billion, equivalent to 0.8 percent of the gross banking sector loan portfolio of Ksh.3.6 trillion at the end of October 2022.
“The borrowers covered in the Framework are mainly in the personal and microenterprises sectors and were adversely impacted by the COVID-19 pandemic. Their lives and livelihoods were severely impacted by the pandemic through inter-alia loss of employment and closure of their micro-enterprises. The adverse effects of the pandemic continue to linger for the covered borrowers,” read part of the press statement.
Accordingly, the Framework is expected to enable this segment of borrowers to access credit and other financial services as they rebuild their lives and livelihoods.
CBK has also urged the public to honor their payment obligations on their credit facilities when they fall due to enable them build a good credit history based on their payment behavior and thereby obtain loans at better rates in future.