Enhanced Report Gives Kenyan Lenders Ability to Improve Consumer Risk Decisions
The COVID-19 pandemic has put Kenya’s financial institutions, including commercial banks, at the heart of a fast-changing crisis. The reason for this is increasing non-performing loans and the rapidly growing consumer appetite for borrowing at a time when income is under pressure.
As lenders respond to, and recover, from the financial impact of the pandemic, managing the effects of COVID-19 on credit risk is now a top priority, says Samuel Tayengwa, director of product at TransUnion Kenya.
Lenders remain under pressure to restructure loans and offer tax holidays to beleaguered consumers. The impact of the recent extension of the consumer loan repayment period is estimated by TransUnion to apply to around KSh 1.7 trillion, or 57% of the banking sector’s KSh 2.9 trillion consumer lending book.
At the same time, TransUnion’s credit data shows that non-performing loan rates in Kenya have increased to 14.6% in March 2021, from 12.5% in March 2020, as more borrowers are defaulting. Fraud remains an ongoing and increasing concern, with TransUnion data putting annual losses from identity theft and loan stacking in the country at approximately KES 13.3 billion.
With banks under continued pressure to grow revenue and increase market share amidst the backdrop of the pandemic, TransUnion recently announced the launch of TrendedView Report, a new enhanced consumer report that helps lenders understand a consumer’s credit behaviour and repayment patterns before and after the crisis hit to identify credit risk and lending opportunities.
“A credit score alone doesn’t give banks and financial institutions full context of a consumer’s financial position. It’s important to understand the customer journey in the context of economic and business trends. Insights on consumers’ credit scores and loan balances before and after the crisis, how their credit scores are trending, what loan products they have and what the credit limits are, can lead to better risk management and more informed lending decisions,” said Tayengwa.
TrendedView Report provides a more holistic picture of a consumer’s ability to manage financial commitments and determines appropriate risk levels, allowing lenders to know their share of wallet, improve risk decisions, set competitive credit limits and grow their customer bases.
It does this by classifying consumers based on their level of credit activity; showing a consumer’s credit score trend and probability of default; providing detailed information on current outstanding loans; and listing past credit repayments and identifying repayment trends.
“Access to credit is fundamental to a strong and growing economy. This capability will help consumers build financial security by getting access to responsible credit, while giving credit providers deeper insights into the risk behaviour of consumers to better serve them and advance them credit that can lead to a higher quality of life,” said Tayengwa.
 The Central Bank of Kenya has given bank borrowers an additional three months (March 3 to June 3) to regularise their loan repayments following the expiry of a one-year window in which lenders had extended and restructured loan repayments for customers adversely impacted by Covid-19 pandemic.