CBK has raised concerns over misuse of CRB reports. Photo/debanked.com
The Central Bank of Kenya has expressed fears over the misuse of credit reference bureaus (CRB) reports and its implication of access to loans.
In a statement the state regulator says this has negatively affected information sharing mechanism thus hindering credit access.
CBK argues that the main challenge that still stands is the negative public perception of credit reporting, where most consumers view CRBs and credit reports as tools to blacklist them from the financial sector. CBK says there’s minimal utility of the tool.
Through CRB reports, financial institutions are able to view a borrower’s total number of current loans, repayment history and previous bankruptcy.
This allows lenders to extend larger credit at more favourable interest rates.
“Credit providers’ use of credit information in pricing is minimal and they primarily use credit reports to deny or grant credit,” said the regulator.
CBK blames this in part to a lack of a joint credit information sharing in credit appraisal methodologies of lenders.
The current model allows firms to submit borrowers’ information to multiple licensed reference bureaus.
“This is partly attributed to a lack of integration of the credit bureau scores in credit appraisal methodologies of credit providers,” said CBK.
Currently, Kenya has three credit reference bureaus; Creditinfo CRB, Metropol CRB and Transunion CRB.
Complaints have been rife that the firms pose a challenge in lodging and resolving complaints as well as providing their data uniformly to all players in the financial sector.
But they have defended themselves from accusation of giving inaccurate data on borrowers. They said they rely on information provided by banks.