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Credit Reports will Increase Access to Bank Loans for Businesses
If the micro-credit is anything to go by, 95 per cent of Kenyans who take bank loans repay their loans on time. But they do not benefit from this because their credit records remain unknown to other would-be creditors.
The result is the ever rising bank loan interest rates and demands for collateral that can be easily turned into cash. Many people who would be good customers are thus kept out of the credit market.
Credit Report Monitoring Companies
This will however, change by July 12 when banks and other financial institutions in Kenya start circulating borrowers’ credit reports among themselves. Credit report monitoring companies have already been licensed and have indicated that they have already finalized installation of systems that will allow access to the credit records by banks and other financial institutions.
Among the advantages of the credit report exchanges will be that good borrowers can get loans without the need for collateral. Secondly, the interest rates will come down substantially for good borrowers, according the banks.
Without the credit reports, banks have consistently said, they cannot know which borrower is among the five per cent defaulters. Risks of lending money thus increases, forcing them and other financial institutions to increase their lending interest rates.
Finally, monitoring and circulation of credit reports and borrowers’ data will reduce the time of loan processing, thus borrowers will get their loans within a shorter time after application.
Fraud
Credit report and borrowers data circulation is among a series of measures the Kenya government and financial institutions are taking to ensure greater access to funds and security of deposits.
Other measures include blacklisting of countries with high fraud records. Kenyans travelling to blacklisted countries may not access their funds through their credit or debit cards unless arrangements are made with their banks before the date of travel.
The business community has welcomed these measures as positive and business friendly. They said the measures are likely to increase circulation of money and boost investments.
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