Publications and Reports

Credit information systems can, and should be improved, to enhance access to credit. Existing and upcoming innovations that seek to accomplish this goal inspired the 3rd Regional Credit Information Sharing (‘CIS’) Conference, hence the theme - “CIS for Innovation and Financial Inclusion - Mikopo Kisasa!” Translated from Swahili, “Mikopo Kisasa” means “Contemporary Lending Approaches”. The conference took place on 23rd and 24th February. The Credit Information Sharing Association of Kenya (‘CIS Kenya’) hosted executive delegates, representing various segments of the credit markets in the EAC Region and beyond.

The Conference was followed by the Nairobi Business Community Summit, which took place on 25th and 26th February at the same venue, providing half-day sensitizations on CIS to bank staff and credit consumers respectively on each day. Both events had an interesting and informative program, facilitated by renowned local and global experts who shared insights on fundamental aspects of CIS that are vital in managing credit risk.

In 2010, a communication plan developed through a joint project of the Central Bank of Kenya and the Kenya Bankers Association (then referred to as the Kenya Credit Information Sharing Initiative (KCISI)) was implemented with a special focus on bank staff and customers. The communcation plan objectives were to elicit greater ulitization of credit reports by lenders and borrowers, and enhance confidence in the system and the adoption of prudent borrowing practices. Following feedback from forums held in the first phase of the project, it emerged that there existed a number of myths and concerns about the CIS among lenders and customers, which led to the carrying out of a baseline survey in July 2012. 

The baseline survey measured a number of indicators which targeted both borrowers and credit providers. For credit borrowers (individuals and businesses), the study focussed on

  • financial services and product usage,
  • awareness of CIS among individuals and businesses,
  • perception and attitudes towards of CIS,
  • expectations from CIS guidelines
  • the role of media in promoting CIS

In regards to Credit Providers (Lenders), the report focussed on 

  • awareness levels amongst lending staff
  • usage of credit reference bureaus
  • attitudes and perceptions on CIS 
  • benefits of the CIS mechanism
  • challenges faced by lenders

Key findings from the baseline survey informed the revision of the communication strategy implemented in January 2013 with the immediate objective being the need to increase the awareness levels and enhance a positive perception of the mechanism. 

To track subsequent progress, Ipsos carried out a second perceptions survey on the CIS mechanism. The findings of this survey are contained in this report. 

The second phase of the project started in 2011 and focused on expanding the reach of credit 
information sharing to the broader spectrum of credit providers, creating financial inclusion with 
special  focus  on  getting  on-board  SMEs.  The  major  accomplishment  of  the  Phase  II (which 
ended in December 2014) was enabling all regulated by CBK financial institutions as well as non 
–regulated entities to share full-file records, meaning adding to negative data sharing the positive 
credit information.

The 2nd Regional Credit Information Sharing (CIS) Conference was held in Nairobi on September 24th and September 25th 2013. This is the second conference of its kind, the first one having been held in July 2011 in Nairobi, Kenya.

This second conference emphasized the overall goal of delivering information capital in order to facilitate extension of reasonably priced credit in Africa and by so doing, catalyze economic growth. The conference theme was,Credit Information Sharing: Unlocking Access to Affordable Credit. In addition to promoting public awareness about CIS, the conference sought to promote knowledge sharing and dissemination of best practices in CIS. It also sought to provide a platform where progress made in implementing CIS in different countries could be shared.

Credit information sharing in Kenya’s banking sector was launched on 31st July 2010. Consumer awareness is critical to ensure that the potential benefits of the mechanism are fully appreciated. With funding from FSD, the Kenya Credit Information Sharing Initiative commissioned TNS RMS East Africa Ltd. to carry out a baseline and needs assessment of the current understanding of CIS amongst all its stakeholders. This study was expected to provide valuable insights into stakeholder attitudes, perceptions and opinions about the credit information sharing mechanism. It also showed how much is understood about its operations, products and benefits.

In addition, the findings of this survey were used to design a monitoring and evaluation plan that will track and assess KCISI’s communication strategy against its objectives both short and long term. The plan informed key stakeholders about immediate outcomes, outputs and progress at every stage of the project’s implementation. Finally the survey measured the impact of the overall project after a certain period of time.

The survey was carried out by TNS RMS between May 28th and July 27th 2012. Field work was undertaken between 6th June and July 23rd 2012.

The introduction by the Central Bank of Kenya (CBK) of mandatory submission of non-performing loan (NPL) data by banks marks an important step of credit information sharing in the Kenyan credit market. This noteworthy achievement was established after approximately ten years of deliberation during which time various laws and regulations were passed and a credit bureau licensed. After conducting four “pilot runs,” an important milestone was reached in July 2010 when as the CBK expected all 41 licensed commercial banks and one deposit insurance fund participated in live data submission.

Lending is an important element of financial intermediation, which is itself at the heart of an economy’s financial architecture. It therefore behoves policy makers to continually review the credit market to minimize inefficiencies that hinder faster economic growth. Non Performing Loans, though declining, remain a concern to the quality of lenders assets in Kenya’s financial sector. In addition, good borrowers have been disadvantaged by high interest rates and stringent collateral requirements, as banks cushion themselves against the risk of high Non Performing Assets.
These challenges have been an outcome of information asymmetry, which in the past continually led to the rejection of good credit risk applicants because their credibility could not be objectively proven. On the flip side, serial defaulters adversely affected bank performance, threatened sector stability and inhibited growth of credit to the private sector.

As a result, the need to introduce credit referencing as a risk management tool was identified by Kenyan lenders as necessary to create a vibrant and globally competitive financial sector. Following remarkable efforts and support of the Central Bank of Kenya (CBK), Kenya Bankers Association (KBA), and Financial Sector Deepening Trust (FSD–Kenya), a successful roll out of the credit information sharing mechanism amongst banks was officially launched in July 2010.

Credit information sharing (CIS) is a risk management tool designed to assist in making lending decisions. It is a mechanism through which banks and other financial institutions may justifiably divulge information about their customers without breaching the banker’s duty of confidentiality, which is one of the key tenets of the banker customer relationship.

  1.  The Banking (Credit Reference Bureau) Regulations 2008 were adopted
  2. To provide a framework for the governance of licensing, operation and supervision of Credit Reference Bureaus (CRBs) by the Central Bank of Kenya. The CIS initiative in Kenya is, however, threatened by the risk of litigation arising from information shared by lending institutions, particularly in cases where adverse reports have led to decisions unfavourable to a customer seeking credit facilities, such as denial of the facilities sought. Left unchecked, the result could be the reversal of gains made towards addressing the challenge of the non-performing loans portfolio that led to the collapse of financial institutions in the 1980s and 1990s in Kenya.

Credit information sharing is a risk management tool critical in the process of making lending decisions, and a legal way through which the banker- customer confidentiality can be broken. The enactment of the Banking (Credit Reference Bureau) Regulations 2008 was a legislative intervention aimed at providing a framework for the governance of licensing, operation and supervision of Credit Reference Bureaus by the Central Bank of Kenya.
Credit Reference Bureaus exist to improve the information available on borrowers in an effort to ease financing constraints. The information they make available from a borrower’s credit information such as previous and current loans, repayment history, bankruptcies, among others, allows banks to better distinguish between good and bad borrowers, which enables them extend greater credit at more favourable interest rates. The 2008 Regulations provide for mandatory sharing of credit information on non-performing loans and voluntary sharing of credit information on performing loans. More recently, the the Central Bank of Kenya Act, Banking Act and Microfinance Act have been amended to introduce positive information sharing and participation of deposit-taking microfinance institutions. The expected outcome is that it should be both cheaper and easier to obtain loans.