Borrowers will get 50% off Mobile Non-Performing Loans
By Jane Muia / Posted on November 14, 2022 | 11:24
The CBK is targeting over 4.2 million mobile phone digital borrowers who are negatively rated by CRBs to repair their credit rating.
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The total value is about 30 billion shillings, or 0.8% of the banking sector’s gross loan portfolio of 3.6 trillion shillings at the end of October 2022.
The Central Bank of Kenya (CBK) on Monday announced the rollout of a credit repair framework by commercial banks, microfinance banks and mortgage finance companies.
According to the CBK, the framework aims to improve the creditworthiness of digital mobile phone borrowers whose loans are non-performing and have been reported as such to credit reference bureaus (CRBs).
The framework will see financial institutions grant a discount of at least fifty percent on non-performing mobile phone digital loans outstanding at the end of October 2022, and upgrade the creditworthiness of borrowers from non-performing to performing.
“The limited framework will expire on May 31, 2023. Affected institutions will contact their eligible borrowers to provide further details on the framework,” the CBK said in a statement.
Institutions will then be required to enter into a repayment plan with borrowers for a period up to May 31, 2023, for the balance of the loan. At the expiration of the framework, the creditworthiness of borrowers on these loans will depend on their repayment performance over the six-month period.
The framework will cover loans with a repayment period of 30 days or less that have been offered by these institutions via mobile phones. The CBK is targeting over 4.2 million mobile phone digital borrowers who are negatively rated by CRBs to repair their credit rating. The total value is about 30 billion shillings, or 0.8% of the banking sector’s gross loan portfolio of 3.6 trillion shillings at the end of October 2022.
The framework simultaneously targets borrowers who are primarily in the retail and microenterprise sectors and who have been hit hard by the covid 19 pandemic through, among other things, job loss and the closure of their microenterprises.
“The adverse effects of the pandemic continue to linger for covered borrowers. Accordingly, the framework should enable this segment of borrowers to access credit and other financial services as they rebuild their lives and livelihoods,” reads part of the statement.
The regulator has called on the public to meet their payment obligations on its credit facilities as they come due, as this will allow them to build up a good credit history based on their payment behavior and thus obtain loans at better rate.
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