This archive report was first published on 2 August 2019.
On August 2, 2019, the Central Bank of Kenya (CBK) announced new rules aimed at improving the credit assessment process for non-individual borrowers.
The new rules require banks to submit the names of directors and key shareholders of companies taking out commercial loans to credit reference bureaus (CRBs).
This move is intended to rate the firms' ability to repay debts and reduce the risk of credit defaults.
According to Jared Getenga, chief executive of the Credit Information Sharing Association of Kenya, the information of directors will be shared with the bureau to help lenders assess the level of indirect exposure they have.
The new requirement comes on the back of multiple credit defaults by companies, including Consolidated Bank, Athi River Mining, and Nakumatt.
The CBK says the information will help in risk assessment for non-individual borrowers, but is more likely to have greater value in establishing their identity.
The new CRB template will also link borrowing details to employment records, allowing lenders to have a clearer picture of borrowers.
Employment data will be used for matching and risk assessment, while type of employment and gross monthly income will assist in establishing the ability of a borrower to afford a loan.
CBK ordered banks, microfinance, and credit bureaus to apply the new template in a circular issued in May 2019, which also includes daily updates of information.
These submissions will relate to transactions that have occurred during that day, as well as any demographic data and credit information rectifications.
