Financial institutions will be punished with a fine of KSh2 million every time they deny borrowers loans during the pandemic, according to a new regulation introduced by the National Treasury. 

The rule is meant to punish banks, savings and credit cooperatives, or micro-finance lenders that frustrate borrowers during the COVID-19 period. 

Treasury is trying to ensure that borrowers have access to loans in the midst of the global coronavirus pandemic. Already, more than 2.5 million Kenyans have been denied loans due to their negative listing in the Credit Reference Bureau (CRB).

Lending institutions can now only reject a loan application based on factors other than a credit score listed in a credit report. The institutions will also be expected to provide a written explanation as to why the borrower’s loan application was rejected.

Recently, the Central Bank of Kenya (CBK) barred more than 60 digital lending apps from forwarding the names of defaulters to the CRB due to their misuse of the credit information sharing system.

In an effort to cushion Kenyans and the economy during the global crisis, the CBK also suspended lending institutions from blacklisting borrowers who may default on loans as of April 1.