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Banks Get CBK Greenlight to Blacklist Loan Defaulters

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Banks were on Wednesday handed back the powers to recommend customers who default on their loans for blacklisting at Credit Reference Bureaus (CRBs) following the expiry of a six-month freeze.

Speaking during his post-Monetary Policy Committee (MPC) virtual press conference, Central Bank of Kenya (CBK) Governor Dr. Patrick Njoroge confirmed that the regulator would not be extending the six-month freeze that was supposed to run from April 1 to September 30.

The freeze effected in March was mooted as one of the ways to cushion distressed Kenyans after the first case of COVID-19 was reported in the country heading into a period of total uncertainty.

“We are going back to normal operations, the way things used to happen and that is where we will be come October 1,” said Dr. Njoroge.

“From October 1, banks will have the free rein to assess how borrowers are doing in the payment of their loans.So we are back to the rules,” he added.

More than 3.2 million Kenyans were negatively listed as loan defaulters with the CRBs before the outbreak. These Kenyans have been thrown back into the crunch of figuring out how to pay what they owe at a time most businesses are yet to recover fully.

The Governor also dismissed fears that Kenya stands the risk of debt distress after borrowing heavily since the outbreak under the guise that the government was putting out all stops to ensure that the country was adequately prepared to deal with any scenario.

The fears harboured by Kenyans across the country were catalyzed by reports that Kenya took a Ksh4.5 billion loan daily during the first three months of the COVID-19 pandemic to push the country’s public debt to Ksh6.6 trillion.

“It is true that African countries have increased their debt levels in response to COVID-19, that in my opinion is appropriate. How much, how much you increase it (debt) by has to be calibrated correctly. I don’t think the issue here is that of worrying about debt distress as such, this must not be looked at in the short term but in the medium term,” said Dr Njoroge.

Dr Njoroge was equally dismissive of concerns relating to subdued consumer spending. He expressed confidence that deflation was unlikely as Kenya is making baby steps back into normalcy.

“Consumer spending will come in. For instance 99% of residents in hotels since the reopening have been locals but as the uncertainity abates, we can expect that the consumer will come back into play,” said Dr Njoroge.

He also confirmed that the reduction in forex reserves by Ksh200 million as captured in the MPC release issued on Tuesday was reflective of payment of an external loan.

“Our foreign exchange reserves, we use them for payment including payments for the government, after all, they have to make external payments and there are some loans. We are making payments to them every single month and every single week,” he said.

See Also>>>> Millions of Kenyans Blacklisted by CRB Over Digital Loans Defaults

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