The Central Bank of Kenya (CBK) has announced the rollout of a Credit Repair Framework for mobile loans by commercial banks, microfinance banks and mortgage finance companies
In a statement on Monday, November 14, 2022, CBK said that banking institutions will be required to provide a discount of at least fifty per cent of the non-performing mobile phone digital loans outstanding as of October 2022 and update the borrowers' credit standing from non-performing to performing.
"The framework seeks to improve the credit standing of mobile phone digital borrowers whose loans are non-performing and have been reported as such to Credit Reference Bureaus (CRBs).
The limited Framework will expire on May 31, 2023. The concerned institutions will contact their eligible borrowers to provide them with further details of the Framework," CBK said in the statement.
The financial institutions will then be required to enter into a repayment plan with the borrowers for a period up to May 31, 2023, for the balance of the loan.
Upon the expiry of the framework, the credit standing of the borrowers with respect to these loans will depend on their repayment performance during the six-month period.
Loans covered by the framework
The framework will cover loans with a repayment period of 30 days or less and was offered by these institutions through mobile phones.
It is anticipated that the framework will enable over 4.2 million mobile phone digital borrowers, adversely listed with CRBs, to repair their credit standing.
The total value is approximately Ksh30 billion, equivalent to 0.8 per cent of the gross banking sector loan portfolio of Ksh3.6 trillion at end of October 2022.
"The borrowers covered in the Framework are mainly in the personal and micro enterprises sectors and were adversely impacted by the COVID-19 pandemic. Their lives and livelihoods were severely impacted by the pandemic through inter-alia loss of employment and closure of their micro-enterprises.
"The adverse effects of the pandemic continue to linger for the covered borrowers. Accordingly, the framework is expected to enable this segment of borrowers to access credit and other financial services as they rebuild their lives and livelihoods," CBK added.