The Central Bank of Kenya (CBK) announced on Monday that the credit repair framework, which will be implemented by commercial and microfinance banks, as well as mortgage finance companies, until the end of May 2023, will require the lenders to forgo at least Ksh. 15 billion in debt that the borrowers owe in exchange for a 50% discount on the loans.
CBK unveiled a framework to reduce the load by half, at least 4.2 million Kenyans who were unable to pay Ksh 30 billion in digital loans from banks, microfinance organizations, and mortgage financing firms have received relief.
“Through the framework, the institutions will provide a discount of at least 50 per cent of the non-performing digital loans outstanding as at end of October 2022, and update the borrower’s credit standing from non-performing to performing” the CBK stated.
The goal of the framework, according to the CBK, is to enhance the credit standing of digital mobile phone borrowers who have been listed by Credit Reference Bureaus (CRBs) for failing to make payments on loans they obtained via those phones.
“It is anticipated that the framework will enable over 4.2 million mobile phone digital borrowers, adversely listed with CRBs, to repair their credit standing. The total value is approximately Ksh.30 billion, equivalent to 0.8 per cent of the gross banking sector loan portfolio of Ksh.3.6 trillion at the end of October 2022,” the financial services sector regulator stated.
The Covid-19 pandemic had a significant impact on the majority of the affected debtors, according to the CBK, and this made it more difficult for them to make payments since they lost their jobs and enterprises.