Nairobi, Kenya, August 26, 2008—IFC,
a member of the World Bank Group, today stated that the Kenyan government’s
new regulations for credit bureaus will ease access to finance for small
and medium enterprises in the country.
IFC advised the government and other
stakeholders on developing the new regulations and shared best practices
on credit referencing and regulations. IFC also facilitated a study tour
to South Africa for Kenyan government and banking officials.
Launched in July 2008 by Kenya’s Minister
of Finance, the credit reference bureau regulations provide guidelines
for licensing and establishing credit bureau operations. They also define
consumer protection rights and make it mandatory for financial institutions
to report nonperforming loans. They will become effective in 2009.
“With the announcement of the regulations,
the Central Bank of Kenya will begin receiving applications from viable
credit bureaus and issuing licenses. We will also supervise the credit
bureaus,” said Rose Detho, Director of the Central Bank of Kenya’s Banking
Supervision department. “The new regulations will guide the credit information-sharing
system and help identify serial loan defaulters, who account for most nonperforming
loans. This will allow banks to lower the price of credit facilities for
borrowers with good credit.”
“By making it mandatory for banks to
share information, the regulations strengthen earlier amendments to the
banking act. They also enable private credit bureau operators to apply
for licenses to offer their services to the banking sector,” said Wachira
Ndege, Chairman of the East Africa Credit Bureau Association.
“Credit bureau operations are vital
to building the confidence of the banking sector and for facilitating access
to finance for small businesses,” said Jean Philippe Prosper, IFC Director
for Eastern and Southern Africa. “The new regulations will provide a framework
for a reliable system of credit information sharing, which should give
banks more confidence to lend to smaller business.”
Research shows that credit bureaus are
critical to expanding credit for individuals and small businesses, and
that credit reports increase the quality of credit decisions, while providing
significant risk mitigation and minimizing fraud.
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. For more
information, visit www.ifc.org.