Kenya credit information sharing initiative progress report 2008-2011

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.

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