MICROCAPITAL BRIEF: Kenyan Microfinance Institutions (MFIs) Want Access to Credit Reference Bureaus

Microfinance institutions (MFIs) in Kenya are looking to gain access to the credit information of borrowers that is stored by local credit reference bureaus (CRBs), which allow only commercial banks to access such information in accordance with a regulation implemented in 2008. Representatives of unnamed Kenyan MFIs have reportedly argued that this puts them at a disadvantage by exposing them to the risk of lending to individuals and businesses that have previously defaulted on their loans.

Habil Olaka, CEO of the Kenya Bankers Association (KBA), an association of banks that worked with the Central Bank of Kenya (CBK), Kenya’s central banking authority, to develop the credit bureau regulation of 2008, reportedly said that commercial banks are willing to share credit information with MFIs if the regulation is amended to allow this. However, such amendments could take several years to implement. KBA is currently in the process of drafting a proposal to establish a Kenya Credit Providers Association to create a national database of credit information that will be accessible to all lenders.

By Julie Moksim, Research Associate

About Central Bank of Kenya (CBK): Established in 1966, the Central Bank of Kenya is the country’s central banking authority. CBK enacted the Microfinance Act in 2008 to pave the way for the licensing of microfinance institutions (MFIs) that take deposits from the public, known as deposit-taking microfinance institutions (DTMs). Professor Njuguna Ndung’u was appointed Governor of Central Bank in March 2007.

Sources and Resources:

AllAfrica.com: “MFIs Seek Access to Data on Serial Loan Defaulters” by George Ngigi, January 24, 2011, http://allafrica.com/stories/201101240304.html

MicroCapital.org Brief, January 11, 2011: Commercial Banks in Kenya Lower Loan Sizes to Compete with Microfinance Sector, https://www.microcapital.org/microcapital-brief-commercial-banks-in-kenya-lower-loan-sizes-to-compete-with-microfinance-sector/

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