Kenyans are set for relief after a credit reference bureau announced the launch of a new credit scoring system on Tuesday, February 18, aimed at improving access to loans.
The bureau revealed that the new tech-driven system, which will integrate micro-lending and traditional lending data, is designed to enhance access to funds, particularly for underserved borrowers.
This follows recent data showing that nearly a third of repeat borrowers in the country cannot be credit-scored, putting them at risk of being excluded from digital lending platforms.
Further data highlighted that out of the 21 million Kenyans listed on the Credit Reference Bureau, five million remain underserved despite the growing demand for loans in the country. A significant portion of this population comprises micro, small, and medium enterprise (MSME) owners.
“Access to financial tools is essential and is critical but it is not enough to drive growth opportunities. You need more than just access,” stated the bureau’s local boss.
“In the current financial sector the credit bureaus play a central role in terms of financial inclusion and a credit score is a key tool in ensuring that it happens. Efforts that move towards creating use of credit score and financial literacy in the market is complementary to what is already happening,” he added.
The new tech-based model employs algorithms to score borrowers and determine eligibility and limits for loans. The algorithms consist of data-based tools that examine over 140 aspects of a customer’s financial behaviour to determine their credit risk.
“If we are able to see through the data, trend and possibility, we are able to think about someone bad and becoming better or someone good and becoming worse. If we can see the potential of somebody becoming better, then can we give them a chance?” posited the bureau’s continental chair.
By doing so, the previous system of traditional credit rating that determines one’s credit score through relying on historical loan repayment data will either be wholly eradicated or provide a solid starting point for the new system.
Experts from the bureau argue that the traditional system locks out millions of financially active Kenyans from accessing crucial credit and loans, especially since the majority come from the informal sector.
According to the bureau, the system, which has already been implemented by several bureaus, can greatly assist in clearing the backlog witnessed in the Hustler Fund and result in underserved Kenyans accessing loans.
This comes after data revealed that Ksh129 trillion shillings is transacted on mobile wallets annually all over the world with Africa accounting for 70 per cent of this figure.
