Kenyan loan defaulters listed by Credit Reference Bureaus (CRB) can have a sigh of relief after the Central Bank of Kenya announced a framework to restructure their credit standing.
In a notice dated Monday, November 14, CBK announced that it was rolling out a Credit Repair Framework aimed at improving the credit standing of mobile phone digital borrowers.
According to the regulator, the programme was agreed upon by the commercial banks, microfinance banks and mortgage finance companies that offered the loans to mobile phone users.
The exercise is slated to expire 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.
The notice indicated that the framework will cover loans with a repayment period of 30 days or less and were offered by these institutions through 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.
The financial sector regulator maintained that the framework was aimed at covering the personal and micro enterprises sectors that were affected by the pandemic.
That is to ensure that the segment of borrowers access credit and other financial services as they
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.
Ruto was confident that the exercise would kick off in November.
"I am very happy that 4 and 5 million Kenyans will by beginning November will be out of blacklisting. These Kenyans have been excluded from any formal borrowing and have been left at the mercy of shylocks and predatory lenders," he announced at the time.