Negative listing on loan default is on the decline with the number dropping by more than half between 2019 and 2023.
- •933,551 individual borrowers were negatively listed with Creditinfo CRB last year compared to 2,204,591 individuals in 2019.
- •A significant number of negative listings are attributed to negative loans, accounting for as high as 94 per cent of new negative listings in 2019.
- •The data further shows that female borrowers have better repayment histories compared to men.
“This sharp decline can be explained by changes in the regulatory framework that were introduced in 2020. First, the new regulations introduced a minimum threshold of KShs 1,000 for negative credit information that is submitted to CRBs by lenders,” notes the study by Financial Sector Deepening (FSD) Kenya, Credit Information Sharing Association of Kenya (CIS Kenya) and Creditinfo Credit Refence Bureau Kenya Limited (Creditinfo CRB).
“Second, as previously highlighted, CBK withdrew the approval granted to unregulated mobile-based and credit-only lenders as third-party credit information providers to CRBs. It is important to point out that some of these providers used to submit only negative (but not positive) credit information to the CRBs.”
In each of the five years under review, the number of new negative records attributed to female borrowers was less than those that were attributed to male borrowers. On average, female borrowers contributed approximately 36 per cent of the new negative listings over the five-year period compared to men’s 64 per cent.
A significant number of borrowers that have a negative record have an outstanding loan balance of between KShs 1,001 to KShs 5,000.
The data further indicates that a higher proportion of borrowers initially listed as having repayment difficulties with their loans (negative record) managed to fully repay them off after seven months and within one year.
A significant finding is that 69 per cent of borrowers that previously had a negative record were subsequently issued with a new loan. This is contrary to the public’s perception that the Credit Information System (CIS) mechanism is a blacklisting tool and that a negative listing automatically precludes a borrower from accessing future loans.
“While many of the building blocks that underpin an efficient and effective retail market are in place, available evidence points that the provision of appropriate and affordable credit remains a challenge. MSMEs and women continue to be underserved,” said Francis Gwer, FSD Kenya’s Senior policy specialist.
“Further advancements, such as incorporating all credit sectors and enabling real-time reporting, have the potential to elevate the CIS mechanism to new heights.”, said Kamau Kunyiha, Regional Manager, Creditinfo CRB
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