The Central Bank of Kenya (CBK) has banned unregulated digital and credit-only lenders from submitting credit information of defaulters to the Credit Reference Bureau (CRB). As a result of the Covid-19 stimulus relief package, the ban will clear the names of those who have been listed for having non-performing loans under Kshs 1,000 from 1 April 2020 and will continue on for the next six months, leaving borrowers with more access to loans.

Digital lending applications have gained notoriety for providing borrowers with quick access to small sums of loans. The ban was prompted by public outcry regarding the misuse and abuse of the credit information sharing (CIS) system where lenders have reported millions of borrowers to the CRB for defaulting on loans less than Kshs 1,000. Borrowers have also reported instances of loan apps disclosing critical information to their contacts lists, and there have even been instances of borrowers committing suicide due to unpaid loans.

The directive passed by CBK governor, Patrick Njoroge, however leaves lenders in a grey area until September. “Digital lenders will have to make a business decision on what they will do for the next six months” says Sam Omukoko, the group managing director and CEO of Metropol. “They will have to make the choice to lend to borrowers without knowing their profile and lending history.”

The CBK has provided CRBs with the framework on how they should upload information to their mutually shared system which will now only list defaulters who have defaulted on loans above Kshs 1,000.