NEW BANK CREDIT RATING SYSTEM READY

A new credit rating system to enable quick access to loans for small business has been developed by the Kenya Institute of Bankers (KIB) and Metropol East Africa Limited for commercial banks.

KIB executive director, Stephen Anjichi said it will reduce transaction costs and increase the volumes of processed applications.

Addressing reporters at a media briefing in the City’s Boulevard hotel yesterday, Mr Anjichi said banks have shied away from lending to small enterprises because of high transaction costs and inadequate data. The mechanism was developed through a study of 33 bank credit systems in Kenya Uganda and Tanzania. The mechanism has 82 per cent credit rating efficiency, and will help the banks cut costs on technology.

A similar tool has been used successfully in developed countries. “Its time the banks moved from collateral to information based credit products,” he said.

However, the Banking Act that prohibits revealing of customers information to other parties might need to be reviewed. Mr Anjichi said this would facilitate the setting up of central credit bureau. Metropol East Africa Limited managing director, Sam Omukoko said the mechanism could be used by other sectors that offer services on credit.

“Banks can incorporate the model in their systems, or the small enterprises can be rated to enable them access credit from suppliers” he said.

He said that with the returns on Government securities shrinking, banks held huge deposits that could be loaned to small enterprises through use of appropriate risk evaluation mechanism. Small and medium firms contribute 30 per cent to Kenya’s Gross Domestic Product.

SOURCE: DAILY NATION