East African Business Week (Kampala)
Cedric Lumiti
30 August 2008
Nairobi — The International Finance Corporation (IFC), has lauded the new credit reference Bureau regulations introduced by the government of Kenya.
IFC, a member of the World Bank Group, said the new law will ease access to finance for small and medium enterprises (SMEs) in the country.
IFC Director, Eastern and Southern Africa, Mr. Jean Philippe Prosper said, "Credit bureau operations are vital in building the confidence of the banking sector, and facilitating access to finance for small businesses."
He said: "The new regulations will provide a framework for a regulated and reliable system of credit information sharing, which should give the banks more confidence to lend to smaller business."
Kenya's Minister of Finance formally gazetted the Credit Reference Bureau regulations on July 11, 2008.
The regulations, which come into effect in 2009, provide for the licensing and establishment of credit bureau operations in the country.
The regulations also make it mandatory for financial institutions to report non-performing loans, and provide for the protection of consumers by defining their rights.
Kenya Bankers Association Executive Director, John Wanyela said, "IFC has played a major developmental role to ensure that Kenya provides for the establishment of credit reference bureaus. IFC's global view has been greatly appreciated."
East Africa Credit Bureau Association chairman, Mr. Wachira Ndege said, "These regulations strengthen earlier amendments to the Banking Act by making it mandatory for banks to share information, and allowing private credit bureau operators to formally apply for a license to provide their services to the banking sector."
Central Bank director, Banking Supervision, Ms. Rose Detho said, "With the gazettement of the regulations, the Central Bank of Kenya will now begin to receive applications from viable credit bureaus. CBK will issue licenses and supervise the credit bureaus."
Detho said, "The new regulations will guide the system of credit information sharing, and help identify and isolate serial loan defaulters, who account for the huge stock of non performing loans. With time, this will enable banks to lower the price of credit facilities for borrowers that show a good credit profile."
An official from the finance ministry, Mr. Jared Getenga said that the introduction of formal credit information sharing will improve the lending environment, and help deepen the financial sector.
"The Ministry of Finance will work with the Central Bank of Kenya, and IFC to share international best practices, in order to ensure that we support the successful operation of credit bureaus under the new regulations," Getenga said.
IFC, through its Africa Credit Bureau Programme, advised the government of Kenya and other stakeholders on the process of developing the new regulations, and shared best practices on credit referencing and regulations.
IFC also facilitated a study tour to South Africa for CBK and Ministry of Finance officials, where they exchanged views and experiences with credit bureau practitioners and the national regulator.
Research has shown that credit bureaus are critical to the expansion of credit.
The availability and use of credit bureau reports in credit decisions increases the quality of credit decisions and provide significant risk mitigation by also minimising fraud.
Furthermore, credit bureaus are a crucial building block that allow greater access to finance for both individuals and small businesses, as credit information is necessary when applying modern financial technologies to credit decisions for these market segments.
About IFC
IFC, a member of the World Bank Group fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments.
IFC's vision is that people should have the opportunity to escape poverty and improve their lives.
In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through syndications and structured finance for 299 investments in 69 developing countries. IFC also provided advisory services in 97 countries.
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