August 6, 2018 / 2:27 PM / 3 months ago

Kenya's central bank seeks to have credit scores used in loans

NAIROBI, Aug 6 (Reuters) - Kenya’s central bank wants commercial banks to use credit scores to determine the interest rate they charge customers, a draft banking charter published by regulators showed on Monday.

Commercial banks in the East African economy put all individual borrowers in the same risk bracket, allowing them to charge a high rate across the board, the regulator said.

In 2016, the government imposed a cap on commercial lending of four percentage points above the central bank’s rate, which stands at 9 percent, accusing banks of failing to lower borrowing costs for their customers.

“The use of appropriate credit scoring techniques shall be ascertained by CBK (Central Bank of Kenya) through various avenues, including during on-site examinations,” the regulators said in the draft charter published for public comments.

The central bank accused lenders of only “using information from credit reference bureaus negatively as a blacklisting tool” in the draft charter.

Henry Rotich, the finance minister, moved to repeal the rate cap in his June budget to parliament, but some influential lawmakers have vowed not to support the move. The budget must still be debated and passed by lawmakers before it becomes law.

Reporting by Duncan Miriri, editing by Larry King

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