Kenya central bank wants credit ratings used in loans

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NAIROBI, Aug.6 (Reuters) – Kenya’s central bank wants commercial banks to use credit scores to determine the interest rate they charge customers, a draft banking charter released by regulators revealed on Monday.

Commercial banks in the East African economy put all individual borrowers in the same risk bracket, allowing them to charge a high rate across the board, the regulator said.

In 2016, the government imposed a cap on commercial lending four percentage points above the central bank rate, which stands at 9%, accusing banks of not cutting borrowing costs for their clients. clients.

“The use of appropriate credit rating techniques will be verified by the CBK (Central Bank of Kenya) through various channels, including on-site reviews,” regulators said in the draft charter released for public comment. .

In the draft charter, the central bank accused lenders of “not using credit bureau information negatively as a blacklist tool.”

Henry Rotich, the finance minister, decided to repeal the rate cap in his June budget in parliament, but some influential lawmakers have vowed not to support the move. The budget has yet to be debated and passed by lawmakers before it becomes law.

Reporting by Duncan Miriri, editing by Larry King

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