The Effect of Credit Reference Bureau on Access to Loans in Kenya
Abstract
With the adoption of the CRB regulation in 2008, the banks have been mandated to
share credit information with the licensed CRBs in order to set up a database for all
borrowers and enable checks and balances in the credit market. A lot of information
has been gathered and CRBs are still trying to enlist other sources of information. The
purpose of this was to determine the effect of credit reference bureaus on access to
loans in Kenya. The study used a descriptive research design where the target
population was the 43 registered commercial banks in Kenya. The managers in the
finance, strategy and business development were sampled. The study used
questionnaires to collect data. The questionnaires were self-administered. The data
was analyzed both quantitatively and qualitatively. The study also used regression
analysis to determine the relationship between the number of loans awarded and the
number of loans applied, the CRB reports and loans denied. The results revealed that
the credit information sharing increase in confidence of commercial banks while
giving loans unlike before the CRB became operational. The study established that
more and more commercial banks and other lending institutions have turned to CRB
for credit information to minimize the credit risk. The study however, found that the
banks did not use the negative CRB reports as the only basis by which to deny the
applicants loans. This was evident when the CRB report was used as much as the loan
applications. The results revealed that loans awarded were slightly less than the loans
applied. This was however, equal to the number of loans denied. The study
recommended that all the lending institutions should adopt the use of CRB report as a
means of assessing the credit worthiness of the borrowers thereby minimising the risk
of bad debts. The study further recommended that the government and the lending
institutions should educate the borrowers of the importance of credit bureaus such as
the reduction of the price of borrowing. Lastly, the study recommended that the
Government needs to look into what regulatory impediments to licensing of more
CRBs that may hinder the sustainability of the reference bureaus in Kenya.
Publisher
University of Nairobi