Borrowers To Get 50% Discount On Non-Performing Mobile Loans


Borrowers To Get 50% Discount On Non-Performing Mobile Loans

By Jane Muia / Published November 14, 2022 | 11:24 am

KEY POINTS

CBK is targeting over 4.2 million mobile phone digital borrowers, adversely listed with CRBs, to repair their credit standing.

KEY TAKEAWAYS

The total value is approximately 30 billion shillings, equivalent to 0.8 percent of the gross banking sector loan portfolio of 3.6 trillion shillings at end of October 2022.

The Central Bank of Kenya (CBK) on Monday announced the rollout of a Credit Repair Framework by commercial banks, microfinance banks, and mortgage finance companies.

According to CBK, the Framework seeks to improve the credit standing of mobile phone digital borrowers whose loans are non-performing and have been reported as such to Credit Reference Bureaus (CRBs).

The framework will see the financial institutions provide a discount of at least fifty percent of the non-performing mobile phone digital loans outstanding as of the end of October 2022, and update the borrowers’ credit standing from non-performing to performing.

”The limited Framework will expire on May 31, 2023. The concerned institutions will contact their eligible borrowers to provide them with further details of the Framework,” CBK said in a statement.

The institutions will then be required to enter into a repayment plan with the borrowers for a period up to May 31, 2023, for the balance of the loan. Upon the expiry of the Framework, the credit standing of the borrowers concerning these loans will depend on their repayment performance during the six-month period.

The Framework will cover loans with a repayment period of 30 days or less and which were offered by these institutions through mobile phones. CBK is targeting over 4.2 million mobile phone digital borrowers, adversely listed with CRBs, to repair their credit standing. The total value is approximately 30 billion shillings, equivalent to 0.8 percent of the gross banking sector loan portfolio of 3.6 trillion shillings at end of October 2022.

The framework is at the same time targeting borrowers who are mainly in the personal and microenterprises sectors and were severely impacted by the covid 19 pandemic through inter-alia loss of employment and closure of their micro-enterprises.

“The adverse effects of the pandemic continue to linger for the covered borrowers. Accordingly, the Framework is expected to enable this segment of borrowers to access credit and other financial services as they rebuild their lives and livelihoods,’’ reads part of the statement.

The regulator has called upon the public to honor their payment obligations on their credit facilities when they fall due, as it will enable them to build a good credit history based on their payment behavior and thereby obtain loans at better rates.

Related Content: Top 5 Most Expensive Mobile Loans In Kenya

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