The continued refusal by financial institutions to make positive use of customer credit scores is worrying, being that it is a major reason why a lot of good borrowers are not getting the benefit of cheaper credit.
Instead, the credit reference bureaus have been used by lenders negatively as a tool of coercion to make sure customers make loan repayments, given the negative connotation of a listing.
That banks are largely referring potential borrowers to CRBs when declining loan applications is wrong.
This is despite repeated directives by their regulator to ensure that they also use positive listings when lending, which will lend itself to risk based lending practices that can potentially cut the cost of credit for many Kenyans.
Now that the rate cap has been removed, banks must demonstrate that they are not returning to predatory lending practices that punished good borrowers alongside the bad.
Some of the promises the lenders made when arguing against the rate cap was that they have learnt from past mistakes and will not overcharge for loans, even on risky borrowers.
We are therefore calling upon the lenders to show this in practice, with the proper use of the credit reports a good starting point.
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