The Central Bank of Kenya (CBK) has rolled out a credit repair plan that will see close to 4.2 million mobile money borrowers delisted by credit reference agencies.
The programme will see financial institutions provide a discount of at least 50 per cent, approximately KES 15 billion, of non-performing digital loans outstanding as of the end of October in a bid to improve the credit standing of borrowers.
The institutions will then enter into a repayment plan with the borrowers for a period up to May 31, 2023, for the balance of the loan.
The move will see the institutions update the borrowers’ credit standing from non-performing to performing hence improving their credit standing.
The Central Bank of Kenya (CBK) noted that upon the expiry of the framework, the credit standing of the borrowers with respect to the loans will depend on their repayment performance during the six-month period.
“The framework seeks to improve the credit standing of mobile phone digital borrowers whose loans are non-performing and have been reported as such to Credit Reference Bureaus (CRBs),” said CBK.
The apex bank further noted that the framework will cover loans with a repayment period of 30 days or less.
The total value of the non-performing loans is estimated at KES 30 billion, equivalent to 0.8 per cent of the gross banking sector loan portfolio of KES 3.6 trillion at the end of October 2022.
“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,” CBK.
The borrowers to be covered in the framework are mainly in the personal and microenterprises sectors and were adversely impacted by the Covid-19 pandemic.
For some of the covered borrowers, the adverse effects of the pandemic continue to linger.
Accordingly, the framework is expected to enable this segment of borrowers to access credit and other financial services as they rebuild their lives and livelihoods.
CBK reminded the public to honor their payment obligations on their credit facilities when they fall due.