Banks call for changes to credit information sharing system
Banks call for changes to credit information sharing system
The government’s move to cap interest rates has now shifted focus to how borrowers will engage banks in loan negotiation.
With the capping likely to make banks more risk averse, borrowers deemed too risky may have a hard time accessing credit.
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However commercial banks are now calling for an overhaul of the credit information sharing mechanism to boost vibrancy in the country’s credit market.
According to NIC Group Managing Director John Gachora, while the law caps the maximum amount banks can charge on loans, there is still room for borrowers to push for lower rates depending on their credit scores.
“We need to be able to different people’s credit ratings. Therefore in my view, the credit reference bureau framework must continue to evolve because down the line I want my customers to be able to walk in and say 14.5 percent is too high for me, I want 10.5 percent,” Mr Gachora said on an interview on Citizen Business Centre.
The credit reference bureau system was introduced in 2010 with the expectations that borrowers could have an upper hand while negotiating with lenders for preferential interest rates.
However the system has been prone to abuse, with most borrowers concerned that banks have previously only shared negative information, lowering their credit scores.
This saw the Central Bank of Kenya (CBK) in August issue a notice to all commercial banks warning of stiff penalties for misusing the information sharing tool.
While banks conquer that the lending landscape had changed, borrowers are still central in the pricing framework.
KCB Group Chief Executive Officer Joshua Oigara however cautioned that borrowers also needed to ensure their credit scores are accurate to ensure the cost of credit can come down further.
“The banks now, we’ll need to see more innovation that if you get a score of 100 points or 900 points you can actually be able to push for a better kind of access of credit from your bank,” Mr Oigara said.
Source:https://citizentv.co.ke/
