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• Kenya Licences First Credit Reference Bureau

Kenya Licences First Credit Reference Bureau - Reuters

Kenya licensed its first credit reference bureau on Thursday, which is seen eventually leading to lower commercial lending rates by improving credit information in the banking sector, the country's central bank governor said.
For many years, Kenyan banks have had to contend with having incomplete information about borrowers, that in turn translated to higher risk premiums on interest rates.

Bank industry players also say lack of credit reference information leads to a risk of overpricing low risk borrowers and underpricing high risk borrowers.

" The risk premium that is always associated with information asymmetry will be solved," Njuguna Ndung'u told a briefing while handing a licence to Credit Reference Bureau Africa Limited (CRBAfrica).
" It's the end of the serial defaulter, it's the end of those who used information asymmetry to their own advantages."
Ndung'u said the credit bureau would be a boon for those in the informal sector, and small and medium businesses and allow those with lack of physical collateral like land and building to borrow based on their track record.

" Borrowers without access of physical collateral will always be constrained from accessing credit. Credit information sharing would thus enable those borrowers to build a track record that they can use to access credit," he said.
" This will essentially be pertinent to those borrowers in the informal sector and even in the small and medium enterprises, who ... have a good track record but that information is not captured anywhere."

Established in 1990, CRBAfrica also has operations in Rwanda, Malawi, Zambia and Botswana.

© Thomson Reuters 2010 All rights reserved

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