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Banks Want Government to Lift Moratorium on Loan Defaulters

Commercial Banks are calling on the government to lift the moratorium on listing loan defaulters with Credit Reference Bureaus (CRB).

They say the move which was instituted in March this year as a measure to cushion Kenyans from the Impact of COVID-19 is stifling the credit market.

Equity Bank Chief Commercial Officer Polycarp Igathe says the moratorium has made loan pricing for individual customers difficult since the order was issued by President Uhuru Kenyatta.

Since the CRBs come into force in 2013, they have managed to amass a total of 378 million records, of which, 42 million are blacklisted meaning that they can’t access loans from the local formal lending institutions.

Of these, 13 million are being blacklisted for amounts less than Ksh. 1,000 according to data from the Central Bank of Kenya.

However, on March 25th the government suspended the sharing of negative information among credit reference bureaus for a period of six months from April 1 to September 30, 2020, to lessen the economic impact of the Coronavirus pandemic.

Igathe says the moratorium on credit reference bureau has led to a slowdown in credit to the small medium enterprises, since commercial banks are unable to access the history of many borrowers.

The Central Bank of Kenya in June revealed that the ratio of non-performing loans stood at 13.1 percent, the highest since August 2007 when it stood at 14.41 percent.

The regulator highlighted that there was a sharp decline in new business loans, despite the repeal of the interest cap in November 2019 due to business slow down caused by the COVID-19 pandemic.