Kenya’s credit information sharing (CIS) mechanism has been under development for ten years now since the formal launch in July 2010. Anchored in the Banking Act, the mechanism was primarily established for institutions licensed under the Banking Act. However, subsequent amendments to the underlying CRB Regulations allowed for the participation of non-regulated credit information providers identified as third-party credit information providers.
The inclusion of unregulated credit information providers broadens the sources of credit information within the mechanism for profiling customers and the development of credit scores. It also encourages the application of credit information in credit decisions in the broader credit markets. The CIS mechanism has facilitated the growth of non-traditional credit information providers, such as digital lenders, thus widening credit by micro borrowers.
Recent developments and focus by lenders on default listing have led to perceived abuse of the CIS mechanism, especially concerning consumer rights, data submission standards, and equitable application of the CIS mechanism in making credit decisions. The CBK announced the withdrawal of approvals previously granted to third-party credit information providers.
To address this, CIS Kenya came up with an initiative to establish an adequately defined criterion and set of standards for participation in the CIS mechanism. Besides developing an industry Code of Conduct, CIS Kenya has initiated a process to establish Onboarding Procedures for third-party credit information providers. It is hoped that the adoption of these it could allow for the mechanism to become what it was intended, an equitable risk management mechanism that empowers both the consumer and the credit provider.
In addition, new CRB Regulations, CRB Regulations 2020, were issued in April 2020 to strengthen further the CIS mechanism. The regulations set out a new regime with strict requirements for data sharing, including the signing and adherence to an industry Code of Conduct and a condition that approved third-party credit information providers submit their complete portfolios of data to all licensed CRBs. The requirement for third-party credit information providers to submit to an industry Code of Conduct suggests that the revised regulations have delegated some of the responsibilities for ensuring compliance with the regulations to the industry.
CIS Kenya has taken the initiative to develop procedures for onboarding third-party credit information providers into the CIS mechanism with support from FSD Kenya. This is through a pilot to test and design procedures for the onboarding of third-party credit information providers. The recent developments and focus by lenders on default listing have led to perceived abuse of the CIS mechanism.
Read more in the report.