- Saccos are set to share both positive and negative credit data.
- New system could strengthen lending and curb multiple borrowing.
- Saccos face IT and data protection upgrades before rollout.
Saccos are set to adopt a bank-like full-file credit information sharing system that will enable them to share both positive and negative credit information, in a move expected to strengthen lending decisions and improve financial discipline among members.
The proposed model will centralise credit information from financial cooperatives and allow Saccos to access a more comprehensive picture of borrowers before approving loans.
Unlike the current system, where many Saccos rely on internal guarantor arrangements and delayed reporting of loan defaults, full-file credit information sharing will enable lenders to assess a member’s broader credit history and existing obligations.
The system is also expected to benefit Sacco members by allowing responsible borrowers to build stronger credit profiles and potentially improve their access to credit.
Commercial banks and other institutions regulated by the Central Bank of Kenya (CBK) already participate in credit information sharing through licensed Credit Reference Bureaus (CRBs), where both positive and negative credit information is reported.
However, Saccos have historically operated largely through closed-loop systems, creating gaps that allow borrowers with multiple loans across different institutions to obtain additional credit without their full exposure being detected.
Acting Chief Executive Officer of Creditinfo CRB Kenya, Michael Nyaga, said comprehensive information sharing would also strengthen identity verification and help Saccos reduce the risk of fraud when on-boarding new members.
“All this information gets to it. When you onboard that customer, then you don’t have to worry about the credit risk associated with fraud,” Nyaga said.
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The Credit Information Sharing Association of Kenya (CIS Kenya) is now pushing for financial cooperatives to report complete credit performance, rather than limiting submissions to non-performing loans that have remained unpaid for more than 90 days.
Ada Mukubi, Head of Communication at CIS Kenya, said Saccos hold valuable alternative data that could improve the quality of credit information available within the financial sector.
“A lot of Saccos have data which is good for credit information. This data includes alternative data, which is a major part of what we are looking to get into as the credit information sharing mechanism,” Mukubi said.
She added that improving the quality and scope of data shared through the credit information system would promote responsible lending and borrowing.
CIS Kenya CEO Andrew Njeru urged Saccos to embrace information sharing, warning that withholding borrower data could expose them to greater credit risks.
He said Saccos stand to lose more by operating outside the wider credit information ecosystem, since lenders may lack a clear understanding of borrowers’ financial health.
The transition, however, will require Saccos to strengthen their information technology systems and data management capacity.
Regulatory bodies and industry associations are conducting capacity and IT system assessments to ensure Saccos can securely connect to centralised data repositories while protecting members’ personal information under the Data Protection Act.
Saccos have also been cautioned against fragmented data sharing as the sector moves towards reporting comprehensive credit information, with data quality, privacy and system integration emerging as key requirements for the new model.
By Bernard Magada
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