Many Kenyans have been wondering why huge loans they owed mobile money lenders are no longer appearing in CRB records.
Last week,Jackson walked in a CRB agency office in Eldoret seeking for the crucial CRB services. He requests to see his CRB records but he was afraid huge balances he had defaulted from various mobile money lenders will taint his report.
He says he had borrowed money from at least four mobile money lenders and he inquires to know the total amount he needs to pay before he can arrange on settling the loans and get a CRB clearance certificate.
He is taken through the registration process and told all the amount he has defaulted will reflect on the report.
Upon registration, a report is generated and handed to Jackson. Jackson looks at the seven page report in disbelief as he cannot find what he was looking for.
“Am sure I was listed by at least four money lenders because I have defaulted for almost 6 months now, but why is it that only one account is listed!!?” He asks the CRB agent representative.
The CRB representative goes through the report and informs Jackson that it is only KCB mobile money that had listed him. Surprisingly, records from other money lenders were conspicuously missing from the record. They were neither listed nor appearing anywhere in the records as active.
The CRB agent upon inquiring from Jackson on the names of money lenders that he owed money, it is the response from the agent that surprised Jackson.
“The money lenders you have mentioned were barred from listing defaulters on CRB” the CRB agent stated.
“You are listed by KCB only, pay this KCB loan and we shall update your records and process your clearance certificate” the agent added
Within three days Jackson had made the KCB payment and issued with a CRB certificate after his records were updated. He walked out of the CRB office with a clearance certificate in disbelief.
So, what happened?
Apparently, Digital Money Lenders were cut from Credit Reference Bureau (CRB) in October 2020 by the Central Bank of Kenya (CBK).
The regulator overruled the digital lenders’ authorization to share data on CRBs that banned 337 unmonitored mobile lenders from submitting the names of loan defaulters to the bureau.
In its decision, CBK only retained 39 banks, 14 microfinance banks, 1,353 unregulated SACCOs, 164 regulated Saccos in the CRB after locking out the digital lenders.
The Unregulated Digital Money lenders were for long accused of imposing exorbitant interests and penalties on their clients. Some of their ruthless credit collection strategy also caused uproar among members of the public resulting to CBK taking the stiff action.
The move meant that all the unregulated money lenders had to look for alternative means to of collecting their money from their clients.
However, the likes of Mshwari, Fuliza, KBC M-Pesa and Timiza will still list defaulters with CRB should they default since they are affiliated to various banks.
Mshwari and Fuliza are all products of NCBA Bank, KCB-Mpesa is offered by KCB Bank and Timiza is a Mobile Money Service offered by Barclays bank which has since rebranded to Absa Bank.
This move by CBK has led to Digital Money Lenders to significantly reduce the amount they are lending to their customers
The chair of the Digital Lenders Association of Kenya Kevin Mutiso said that firms decreased the amount from Ksh4 billion to Ksh2 billion.
“We were extending credit averaging Sh4 billion pre-Covid but our loans went down by more than 50 percent in 2020 due to the new government regulations put in place to regulate digital money lending after Covid-19 cases were detected in the country,” said Mutiso.
READ:Can you get CRB clearance without paying your default loan? All you need to know
DLAK is a digital lenders association comprising of Tala, Alternative Circle, Stawika Capital, Zenka Finance, MyCredit, Okolea, Lpesa, Four Kings Investment, Kuwazo Capital, and Finance Plan.
Research conducted by Digital Credit, Financial Literacy, and Household Indebtedness shows that the rate at which Digital Money borrowers default loans is twice that of conventional loanees from banks.
“Most borrowers initially were borrowing with no intention to pay back,” he added. 90 percent of the Kenyans blacklisted in the CRB on February 2 were digital borrowers. The digital lenders ceased rendering loans in March last year and resumed targeting the clients who repay.