The credit information sharing industry in Kenya has received a boost after the industry body, the Credit Information Sharing Association of Kenya (CIS Kenya), launched a code of conduct governing credit providers. unregulated credit information.
The framework’s launch in Nairobi on Thursday comes less than four months after the Central Bank of Kenya (CBK) approved a proposed code, governing these participants after changing its regulations last year to allow such a mechanism to be developed. by industry.
CIS Kenya CEO Jared Getenga said the code aims to achieve three key goals – data quality, consumer protection and customer focus – following numerous complaints about abuse from referral offices. credit (CRB) and consumer abuse.
“Currently, regulated lenders are required by law and the Central Bank to submit accurate data. Thus, CIS Kenya, under the code, will check the quality of this data to ensure that consumers are not disadvantaged by inaccuracies, ”Getenga said.
“Some of the inaccuracies could relate to when you paid off the loan. If the update is not performed regularly, it puts the recipient at a disadvantage. For some lenders, when the information from other lenders is not accurate, some of them run the risk of lending too much or too little.
Getenga has denounced the “unacceptable” treatment of consumers by some credit providers, which he accused of using illegal methods to coerce delinquent consumers into repaying their debt or even accessing funds in the future.
“The way I am treated as a consumer needs to be changed. For some people the way they are mistreated includes being threatened, that if you don’t pay my loan I will put you in the CRB. Anyone who has permission to share data with the CRB should not be using this language because, anyway, whether I pay or not, that data is being submitted. So it can’t be if you don’t pay, I’ll point you out. It’s not acceptable.
According to local reports, Kenyans have been subjected to high interest rates on loans and punitive debt collection measures, such as debt humiliation, with an increase in digital lending platforms associated with a period difficult economic.
Such incidents, noted Getenga, had prompted the need to establish a solid framework to govern the industry and correct such bad practices.
“The Central Bank has informed us that all credit providers participating in the mechanism must subscribe to this code of conduct so that they can now identify with the provisions of the code and can be supervised by CIS Kenya with the cooperation and support from the Central Bank, ”Getenga said.
He clarified, however, that the launch of the framework did not mean that the Central Bank of Kenya (CBK) was no longer involved in regulating the sector, as the code was aligned with CBK requirements.
A technical committee made up of industry players will be set up to analyze the performance of code signatories and monitor complaints and any issues that arise in the industry. The committee will then submit a quarterly report to the CBK for action.
Getenga assured the public that this new development will not be taken lightly and that CIS Kenya will closely scrutinize operations and sanctions against code violators will be determined by the “seriousness” of the CBK.
Credit providers who have not yet adhered to the code must do so before December 31 in order to continue participating in the sector or face severe penalties against them.
Some of the sanctions include the imposition of financial penalties, removal from the approved list of the CIS framework – removing the ability to submit and view data from credit reference bureaus – in addition to other measures at the discretion of the central bank.
Getenga said the code would also go a long way in helping Kenya stand out in Africa by improving its credit rating and the overall transparency of its financial system.
“Sharing credit information is a very important criterion in the rating of countries and their financial systems. Kenya has already performed very well due to the breadth of information in the (credit reference) bureaus, as there is a lot of credit in the market and there is a lot of entities that participate in the offices.
“One of the requirements is that you submit both performing and non-performing loans. Our market has passed (submission of both loans) and this adoption has been well practiced in the regulated environment. This must also intensify in the unregulated environment. As a result, Kenya’s ranking will increase because one of the most important measures and incentives for lenders to extend credit is to understand the borrower.
“Access to credit will increase, this information asymmetry that discourages lenders from lending money is disappearing. It’s not just about sharing credit information. Other infrastructure is being put in place which, when put in place, such as the credit guarantee program and other elements, will raise Kenya’s profile on the continent. We are already scoring very high and I think that will keep that momentum going. “