How Proposed Credit Score Targeting Loan Defaulters Works 

  • Central Bank of Kenya (CBK) building in Nairobi.
    A file image of the Central Bank of Kenya (CBK) building in Nairobi.
    Simon Kiragu
    Kenyans.co.ke
  • Loan defaulters could soon be charged a higher interest rate should the new credit score proposals be approved by the government.

    According to Metropol Chief Executive Officer Gideon Kipyakwai, Credit Reference Bureaus (CRBs) will maintain records of all borrowers that will inform the interest rate to be charged by lenders

    These records will enable the credit facilities to forecast the ability of a borrower to repay or default on loan repayment.

    The extra interest rate to be charged will be between one and two per cent.

    CBK Governor Patrick Njoroge addresses MPs at the Safari Park Hotel on Monday, September 19, 2022. (1).jpg
    CBK Governor Patrick Njoroge addresses MPs at the Safari Park Hotel on Monday, September 19, 2022.
    National Assembly

    "The two key attributes will be the willingness and ability to pay. If the willingness to pay is not there, it will take time to convert such people,” he stated.

    It was also explained that the new credit scoring will be beneficial to Kenyans willing to repay their loans as it guarantees lenders that they will not make a loss.

    Additionally, CRBs will have a scoring system where Kenyans will be ranked depending on their loan repayment history.

    In documents seen by Kenyans.co.ke some have proposed the adoption of the 200-900 rating with 200 being the worst rating. 

    The ratings already adopted by Metropol will then be used in determining the interest rates.

    "The score is calculated using mathematical models developed from the behaviour patterns of credit data provided to the credit bureau.

    "The formula looks at such things as outstanding balances, total available credit, late payments, and the age of the credit account," Metropol stated. 

    The proposal came after President William Ruto instructed a review of the credit score system that blacklisted loan defaulters hindering their ability to access other loans.

    Ruto noted that the most affected group were Kenyans running businesses.

    “This is a positive development for millions of Kenyans who are excluded from accessing credit. We have the largest opportunity in enabling credit access to MSMEs.

    “Instead of blacklisting, we can have a graduated listing of borrowers based on how they have borrowed and how they have paid back,” he stated.

    President William Ruto signs a document during the swearing in ceremony of CSs on October 27, 2022..jpg
    President William Ruto signs a document during the swearing-in ceremony of CSs on October 27, 2022.
    William Ruto