Central Bank of Kenya (CBK) has announced a one-year suspension of blacklisting defaulters with loans of less than KSh 5 Million with Credit Reference Bureaus(CRBs) for a period of one year. This follows the publication of legal notice No. 225 of November 5th 2021, signed by Cabinet Secretary-National Treasury & Planning Ukur Yatani.
Consequently, loans below KSh 5 Million that fall in arrears from 1st October 2021 to September 30th, 2022 will not lead to blacklisting by CRBs. CRBs will also not include any negative credit report for loans of below KSh 5 Million that went into default within the said period.
This is one of the interventions for the banking industry that was unveiled by President Uhuru Kenyatta on October 20th, 2021, to shield cash strapped micro, small and medium-sized enterprises that are still reeling from the negative effects of the COVID-19 pandemic effects.
Central Bank warns that the suspension could force banks to ration credit
CBK has warned that the listing suspension could affect lenders who will have difficulty in distinguishing between good and bad borrowers during the period. The result could be credit rationing by banks, similar to the era of interest rates capping period that last between 2016 and 2019.
But CBK said in a statement that the one year period is sufficient for MSMEs to recover and turn around their businesses.
The first CRB listing suspension happened at the height of the pandemic outbreak in Kenya in April and ended on 30th September 2021.
CBK is now playing the balancing act of providing relief to badly hit MSMEs while also safeguarding the integrity and effectiveness of the Credit Sharing Information(CIS) mechanism.