Dear customer/shareholder,

It is with pleasure that I write to inform you about the progress that we have made as an industry towards making Credit Information Sharing (CIS) in Kenya a reality. As you may be aware, CIS is being introduced in Kenya in order to ensure that accurate customer information is made available for the benefit of both you and your bank in the process of lending. Following consultations between the Ministry of Finance, Central Bank of Kenya, Kenya Bankers Association and the Attorney General’s Office, an amendment to the law was proposed and passed, allowing sharing of credit information among banks through licensed credit reference bureaus (CRBs). This process will lead to the generation of Credit Reports and Credit Scores for each individual/business from a central database.

It is important for you to be familiar with the following commonly used terms:

Credit Information Sharing (CIS) is a process where banks and other credit providers make information about their borrowers available to other lenders.

A Credit Reference Bureau (CRB) is an organization licensed to collect information from credit providers and a variety of other sources (utility companies, public records) and provide comprehensive credit information on an individual, upon request of an authorized user. The Central Bank of Kenya licensed CRB Africa Limited early this year, as the first such bureau.

A Credit Reportis a report containing detailed information on a person's credit history, including identifying information, credit accounts and loans, bankruptcies and late payments, and recent inquiries. It can be obtained by prospective lenders with permissible reason, to determine his or her creditworthiness.

A Credit Scoreis a measure of credit risk calculated from a credit report using a standardized formula. A positive score is characterized by frequently paid bills; lack of defaults on outstanding balances; maintaining steady employment; the use of no more than 25% of a customer’s available credit. On the other hand, a negative credit score is characterized by late payments; bankruptcy; fraud charges; liens or foreclosures; loss of employment.

In order to ensure accurate and updated information about you is available all the time, you need to regularly review your Credit Report by requesting for a copy from the CRB. Where you observe errors, you have a duty to point them out to the CRB so that necessary corrections can be made to avoid inaccurate credit scores. Please note that confidentiality of your information will continue to be strictly observed, as this has been carefully included in the legal requirements.

What information can credit providers share in Kenya?
If borrowers have defaulted on a loan or a payment instrument (cheques and standing orders) then the bank must share this information with all other banks. This is called negative information. In Kenya, the Banking (Credit Reference Bureau) Regulations 2008, mandate banks to share negative information about their borrowers with other banks. If borrowers have a loan and are paying regularly and are up to date, banks may share this information with other banks. This is called positive information. In Kenya the law allows banks to report positive information.

The key benefits of this exercise are to:

  1. Increase your access to credit, as you will now be able to use your Credit Report as a form of Collateral.
  2. Avoid over-indebtedness.
  3. Help us all maintain good credit records and adapt prudent borrowing practices.
  4. Eventually lead to better terms, such as lower interest rates, as you can use your Credit Report to negotiate the loan terms.

The banking industry has run successful trials of the credit bureau service, and has plans to launch it in July 2010. We urge you to cooperate with us in updating your records so that we can work together to improve access to credit and boost economic growth in support of the objectives of Vision 2030.

May I take this opportunity to reaffirm our commitment to serve you with the same devotion and quality which you have come to expect from us. Thank you for your continued support and investment in Bank of Baroda (K) Ltd.