In as much as some loans are unavoidable, it is advisable to have an understanding of loans before taking out one. Below are a couple of questions and answers in regard to loans and credit reference bureaus that we sourced from “my 15min chat with a bank CEO”. We figured sharing the questions and their subsequent responses will give you a clearer understanding of loans and the credit reference bureaus. The questions were asked by members of the public and answered by Richard Etemesi, CEO, Standard Chartered Bank.

Q) Pedro:  Why should banks charge me a penalty of up to 10 per cent for early repayment.. I mean you give me cash to generate wealth, if i do and repay you why punish me by that much. 

A) Richard: Under the agreement reached between the Central Bank of Kenya (CBK) and Ministry of Finance with the Kenya Bankers Association (KBA), banks have suspended early repayment penalty provided that you are not transferring your loan to another bank to take advantage of there reducing loan rates.

Q) RPG254: Richard, I reviewed the terms and conditions of some loan documents and found banks have all the rights including the ability to call the loan for any reason. Why don't we have standard docs that protect both banks & customers in equal measures?

A) Richard: The KBA Credit Committee is looking into standardisation of terms and conditions across the industry. In addition, KBA will be creating the office of the banking ombudsman who’s responsibility will be to arbitrate between consumer and the bank in case of disputes.

Q) Zephie: Hallo Mr Richard. Sir, We were told that the introduction of credit reference bureaus would make things better, this has not happened , Why?

A) Richard: hello Zephie…credit reference bureaus are a work in progress…at the moment…we are sharing negative data amongst commercial banks. We decided to start there to clean up the system…the real benefit will come once banks share positive data, which will make it easier.

Q) Setwin: When do you anticipate the banks to begin sharing positive data?

A) Richard: Banks have not started sharing positive data yet…but we will start soon…we also are bringing in other credit providers like Micro Finance Institutions (MFIs) and SACCOs so we have a complete credit history.

Q) Tygona: Is it true that if you opened an account and didn't use it for a while, you will get listed on the CRBs due to accumulated charges? 

A) Richard: Tygona thank you…no..it doesn't

Below are highlights from the above discussions:

• Banks have suspended early loan repayment penalties, provided that one is not transferring the loan to another bank to take advantage of their reducing loan rates.
• KBA will be creating the office of the banking ombudsman whose responsibility will be to arbitrate between consumer and the bank in case of disputes.
• Credit reference bureaus (CRB’s) are currently sharing negative data about loan defaulters in an attempt to cleaning up the system. They will start sharing positive data soon.
• Lastly, in case you don’t use your bank account over a long duration of time and the banking charges accumulate, you will not be listed in the CRB’s.