Kenya-Bank - It is now just over a year since the credit reference bureaus started operating in this country. The rationale of licensing them was to check persistent credit delinquency, a situation attributed to lack of transparency in the industry. Die-hard delinquents would move from bank to bank, leaving behind a trail of bad debts and shaking confidence of the industry. Central Bank of Kenya (CBK) data indicates that banks have sought information on a significant one million potential creditors. That can only be termed a positive development as only good debtors should have easy access to credit. Bad ones should pay a risk premium. However, even as we welcome this time-tested tool, we have major reservations over tagging borrowers who abandoned accounts without formally closing them. It is important to go back to history. In the 1990s, Kenyan banks found themselves in a situation where they could survive by only lending to the government. In other words, they had little time for expensive small savers and account holders.

What resulted was a situation where banks, especially the big ones, held customers in utter contempt. They would be forced to change in 2003 when the new government stepped up tax collection and mended fence with international financiers.

This meant that government was taking less from the domestic markets, meaning banks were forced to look for the 'small people' they abandoned.

As they found out, going back to the masses was a difficult task as the likes of Equity and Family had locked in this market segment, which was still seething from the unfair treatment.

The big boys continue to pay the price as the likes of Equity tap massive deposits and use this to lend--in the process overtaking them in terms of profit and size.

We submit that banks have no right at all to punish customers who were running away from humiliation. To include them in the list of delinquent borrowers is totally dishonest and should attract severe reprimand from the regulator.

If the bureaus allow themselves to be abused like this, people are going to lose faith in their services.

On top, customers are not going to sit idle and see banks shred their reputations as there are legal recourse.

We trust CBK will act and stop this abuse which smacks of revenge.

Business Daily/02/11/2011