Central Bank-Kenya - The Central Bank plans to widen the net for the credit reference checks to include Microfinance institutions and Savings and Credit Co-operatives (Saccos), the bank's governor said yesterday. Njuguna Ndung' u said microfinance institutions and Saccos will soon start sharing credit history of their borrowers with banks and among themselves. Currently only banks are required by law to share credit information about their clients as part of measures aimed at reducing the incidence of non-performing loans in the banking industry.'The Central Bank is currently working on modalities of incorporating deposit taking microfinance institutions into the credit information sharing mechanism,' said Ndung'u during the official launch of the church ran SMEP deposit taking microfinance.

Apart from Saccos and MFIs, the governor said the regulator is keen to have all other licensed credit providers access and exchange credit information across the board.

In total, microfinance institutions in Kenya have advanced loans to the tune of Sh16.8 billion.'It is hoped that the merging of credit information from these various players will provide for a stronger credit market that will improve the pool of credit borrowers, decrease defaults, reduce credit costs and ultimately result in a stable financial sector,' Ndung'u said.

Credit reference bureaus are licenced collect information on people's loan repayment history. They may provide such information to banks or mortgage firms upon request to help them gauge the creditworthiness of potential borrowers. Borrowers with good repayment history are then able to negotiate for cheaper interest rates on loans.

Meanwhile, SMEP DTM has announced plans to convert into a fully fledged commercial bank after it is through with a divestiture exercise that will see the National Council of Churches of Kenya cede 75 per cent shareholding to other churches and other investors. NCCK currently fully owns the microfinance organization.

If the plan to convert into a bank succeeds, SMEP will be similar to Equity Bank which started as a microfinance but later transformed into a bank.

The divestiture programme will start in the next four years according to the NCCK secretary general Peter Karanja. 'We invite all churches in Kenya to take opportunity to take ownership in this growing organization,' said Karanja.

Peter Kiragu

Nairobi Star/07/04/2011