A Credit Information Sharing (CIS) feature that was implemented by Kenyan financial institutions in 2010 reportedly has been expanded to include deposit-taking microfinance institutions (DTMs) and savings and credit cooperative societies (SACCOS) in an effort to increase information sharing among financial institutions [1]. CIS will help financial institutions keep a track record of borrower repayment habits and reinforce good repayment behavior and borrowing practices [2]. The expansion is expected to help reduce interest rates in the financial market by decreasing credit defaults, thus providing an incentive for lenders to lower interest rates.
Kenyan Central Bank Governor Professor Njuguna Ndung’u reportedly stated that the “expansion of the database to other credit providers will provide a complete picture of the customers and enable the providers [to] develop tailored products to their requirements” [1].
According to Mwangi Githaiga, Managing Director of Kenya Women Finance Trust Limited (KWFT), a member of the US-based Women’s World Banking network, “a comprehensive database [of credit information sharing] minimizes the chances of a customer’s over-indebtedness and defaulter migration, which is triggered by arbitrage opportunities that pose a major threat to the financial sector [1].” As of October 2013, the overall default rate for the microfinance market in Kenya is approximately two percent.
By Anesa Kratovac, Research Associate
Sources and Additional Resources:
[1] Standard Media Article, September 23, 2013, “Credit information tool to lower lending rates,”http://www.standardmedia.co.ke/?articleID=2000094283&story_title=credit-information-tool-to-lower-lending-rates&pageNo=1
[2] A Consumer Guide to Banking in Kenya, http://www.kba.co.ke/consumer%20guide/credit.html
MicroCapital Article, October 10, 2013, “Airtel Kenya, MicroEnsure, Pan Africa Life Announce Launch of Mobile Life Insurance in Kenya,” https://www.microcapital.org/microcapital-brief-airtel-kenya-microensure-pan-africa-life-announce-launch-of-mobile-life-insurance-in-kenya/
MicroCapital Article, May 24, 2013, “Agricultural Mobile Applications in Kenya Increase Market Information for Farmers,” https://www.microcapital.org/microcapital-brief-agricultural-mobile-applications-in-kenya-increase-market-information-for-farmers/
Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/.
Similar Posts:
- MICROFINANCE PAPER WRAP-UP: “Mobile Money, Interoperability and Financial Inclusion;” by Markus K Brunnermeier et al; published by National Bureau of Economic Research (NBER)
- SPECIAL REPORT: Fintechs vs MFIs – a Debate at European Microfinance Week
- SPECIAL REPORT: How to Achieve Responsible Digital Financial Services: European Microfinance Week Opens
- MICROCAPITAL BRIEF: Nala Expands to Kenya, Offers Direct Bill Payment from UK, US
- MICROCAPITAL BRIEF: Axis Launches axisPay Mobile Money App for Small Businesses in Egypt
