bureau and that ’ s why at that time the bureau became like a blacklist . So you were in the bureau because you have defaulted so it became easier now for banks to start lending because they would check in the bureau if you were listed as a defaulter . If you are not listed then they would give you a loan .
Between 2010 and 2012 the non performing banks dropped from high of 24 % to a low of 8 % so it encouraged the banks to start lending again . But the bureau is not here to only help the bank in isolating the risky customer . What about the good ones ? So we went back again and lobbied members of parliament and asked that this thing be made universal so that credit bureaus could start adding value to customer profiles .
That was accepted in 2013 and in 2015 all banks were mandated to start sharing information on any borrower . The law also had provision that besides the banks , other credit providers like Saccos , finance institutions , providers of goods and services on credit and utility companies could also share credit information of their customers .
Today as we speak every institution that gives credit submits the names on their data into the Credit Reference Bureaus . In Kenya if you have an ID you are already on CRB data and can check your profile by dialing * 433 #. You will see your credit profile with a score and that score has a measure that determines whether you can get credit or not .
The good news is that it has moved credit from being a relationship thing to being a transaction thing , that is why banks are now establishing a lending platform like the M-Shwari , KCB Mpesa that use your record at the CRB to give you money without you opening an account with them and that same thing is now happening to small businesses .
The credit landscape has now changed . If you look at Branch and Tala used to be called Mkopo Rahisi . They use social media data to calculate whether you can pay a loan or not , if you download the app and use that app to apply for a loan they check your social media i . e . Facebook , LinkedIn and CRB .
These are called Fintech , they use technology to try and push credit products to consumer . The fact that it is now easier to access credit means that no one can say I cannot access credit . If you cannot access it is because you have a poor credit score . A credit score is a measure of credit worthiness . It is a number that lies between 100 and 900 . We have a cut off of 400 . If your score is below 400 you cannot access credit , you have a default item on your profile . If you have a score above 400 as it goes to 600 it means you can access credit as much as your capacity can allow .
You need to know the consumers and a good score is a good indicator that the person you have lent to will honor their payments .
If you go to developed countries they don ’ t carry cash it is the ability to access credit based on their credit profiles with CRB that determines whether they have purchasing power or not . There are a number of other challenges that are coming into the market one of them being the interest rate capping .
For borrowers interest rate capping was good news because the bank was lending at 28 % and all of a sudden they were told you cannot lend beyond 14 %. It is just not 14 % it is the Central Bank rate plus 4 % so if the central bank rate went to 12 % the banks will lend you at 16 % but the good news is that interest capping has leveled the playing ground enormously .
Banks were used to abnormal pricing and this is a corrective measure that is allowing them adjust and start developing other products to the market and that is a good thing . Look at the U . S ! For over 10 years interest rates have been at 0.5 %! Everybody has credit , and everybody has money and the economy grows .
Another development is the IFRS9 an international accounting standard that says that a bank will provide for a loan that starts to become doubtful from day one , that means if you borrow and your loan is not performing well the bank is required to provide for that loan in full . Previously they could keep rolling out the account and therefore over-state their profit .
IFRS9 is saying you can no longer overstate your profit . You have to provide fully . The impact of that is the banks are now saying they are not going to lend to micro enterprises and they are not going to give you un-secured credit so that is going to have an impact on your ability to access credit from banks .
Credit is the oil that moves the economic engine and therefore everybody should be able to take advantage of credit facilities available in the market . We all must be able to know the upside of credit and the downside of credit . CRBs , as explained are poised to play an even bigger role in financial discipline and business stability .
We have seen that credit in families can be quite a challenge ! Credit has pushed some people into separation , auctions and all manner of distress with others even committing suicide . But if credit can be well managed and accessed for purposes that are genuine and with integrity , credit is the real accelerator of economic progress and the living standards of people .
Sam Omukoko is the Chief Executive Officer of Metropol Corporation Limited . This is an abridged version of his key note presentation at the final 2017 Mombasa Quiznite as captured by the Marketing Africa Magazine editorial crew . You can engage him on all matters credit or related issues via email at : Sam . Omukoko @ metropol . co . ke .