Fear as Kenya’s three licensed Credit Rating Bureaus, found to be using different formula to calculate borrower’s risk

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Fear as Kenya’s three licensed Credit Rating Bureaus, found to be using different formula to calculate borrower’s risk.

Central Bank Governor Patrick Njoroge has expressed fear as Kenya’s three licensed Credit Rating Bureaus, have been found to be using different formula to calculate borrower’s risk which would definitely create confusion in credit circles.

While addressing a three-day regional conference on credit information sharing in Nairobi, the he said the mechanisms for determining an individual’s credit score should be harmonised.

“Credible data will help lenders trust Credit Reference Bureaus (CRBs) in gauging a borrower’s credit score based on an updated credit history of the borrower. Good guys (borrowers) should benefit from risk-based credit pricing and this requires us to have a robust real-time credit history processing platform,” Dr Njoroge said, that uniform credit score formula would enhance truthfulness of reports submitted to banks on a borrower’ credit score.

Kenyans have experienced the annoyance of being blacklisted by one Credit Reference Bureau (CRB)  while being given a clean bill of health by another due to differing formulas for reviewing credit scores, bring about some Kenyans being denied loans by banks on this basis.

Kenya Credit Rating Bureau using different formula to calculate borrowers risk

Fear as Kenya’s three licensed Credit Rating Bureaus, found to be using different formula to calculate borrower’s risk

Dr Njoroge said the CBK was working on a mechanism where a central server for financial technology firms (fintech) using the mobile phone platforms will facilitate submission of client credit information for uploading.

All lenders should avail borrowers’ data to the Credit Information Sharing Association (CIS) platform, this would help Credit Reference Bureau to correctly decide a borrower’s credit score from all available credit data. It could also end the mobile lender‘s distresses where some Kenyans borrow money from different mobile lenders with no intention of repaying.

Lenders’ systems of determining a borrower’s appropriateness to access loans internally was outdated and advised them to hire data scientists whose role will be to help banks understand Kenyans’ borrowing habits enabling formulation of innovative loan products that the market wants.

Dr Njoroge also warned Credit Reference Bureaus (CRBs) against breaching customer privacy saying Credit Information Sharing Association of Kenya (CIS) must facilitate the processing of credit data for specific purposes as requested by lenders. “Integrity is central to how the credit information system handles customer data. This is not just about protection from external hackers, but also from internal misuse,” he said.

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