Kenyan loan defaulters listed by Credit Reference Bureaus (CRBs) can breathe a sigh of relief following the Central Bank of Kenya’s announcement of a framework to reorganize their credit status.
CBK announced on Monday, November 14, the launch of a Credit Repair Framework targeted at improving the credit standing of mobile phone digital borrowers.
The scheme was agreed upon by the commercial banks, microfinance banks, and mortgage financing companies that provided loans to mobile phone users, according to the regulator.
The exercise is scheduled to end on May 31, 2023.
“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 end October 2022, and update the borrowers credit standing from non-performing to performing. “The institution will then enter into a repayment plan with the borrowers for a period up to May 31, 2023, for the balance of the loan. Upon expiry of the Framework, the credit standing of the borrowers with respect to these loans will depend on their repayment performance during the six-month period,” read the statement in part.
According to the notice, the framework will include loans having a repayment duration of 30 days or less that were made available by these institutions via mobile phones.
“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 end October 2022,” added the statement.
According to the financial sector supervisor, the framework was designed to address the personal and microenterprise sectors that were hit by the pandemic.
This is done to ensure that the sector of borrowers has access to credit and other financial services rebuild their lives and livelihoods
Towards the end of September, President William Ruto had unveiled a plan through which mobile loan defaulters could create a win-win situation with the digital credit providers.
At the time, the Head of State maintained that about 4 to 5 million Kenyans who were blacklisted by the CRBs would access more opportunities.
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