| dc.description.abstract | Credit Reference Bureaus (CRBs) are institutions that collect information from banks, creditors and
available public sources on a borrower’s credit history. The role of CRBs in Credit Information Sharing
(CIS) is to compile database of customers’ credit information and generate Credit Reports which banks
and other authorized lenders use to appraise the credit worthiness of the customers. The purpose of the
study was to establish the nature and extent of the information which the customers lacked about CIS and
the causes of the asymmetry of information with a view to improving awareness and participation. The
researchers conducted unstructured interviews involving customers from banks in Nakuru town, and
wrote their responses verbatim. The data was analyzed qualitatively by identifying major themes, coding
them, and carrying out content analysis. The researchers found that 62% of the customers were unaware
of CIS. Furthermore, the informed customers had more exposure to their obligations in the CIS and the
consequences of violating them. In contrast, they had no or little information about their rights and how
they could benefit, hence low participation. Therefore, the policymakers and promoters of the CIS in
Kenya should develop message content that highlights the benefits and rights of customers in the CIS.
Key Words: Asymmetry of information, Credit Reference Bureaus, Customer, Credit Information
Sharing, Credit Rating, Obligations, Rights.
INTRODUCTION
Pursuant to the Banking Act (Credit Reference Bureau) Regulations 2008 (henceforth “the Act”), Credit
Information Sharing (CIS) was rolled out in Kenya by the Central Bank of Kenya (CBK) in July 2010
and the banks started submitting the customers’ credit information1
in August 2010 to the two CRBs:
The CRB Africa Ltd and the Metropol Ltd. According to CBK (2011) as of 11th April 2011 banks had
submitted over 760,000 records and accessed 442,128 credit reports2
from CRB Africa Ltd which was
the only CRB. Against this commendable progress by banks, customers accessed only 865 credit reports
which were below the CBK’s expectations due to unawareness of CIS. However, to the researchers’
knowledge there is no published works that empirically assesses the information gap about CIS in Kenya
due to the infancy stage Kenya is at implementing CIS.
Therefore, this study seeks to establish the nature and extent of the information which the customers
lacked about CIS, the causes of the asymmetry of information, and recommend ways to improve
customer awareness and participation in CIS. The pertinent question which was of primary concern to
the study was, ‘are customers’ aware of how CIS affects them?’ The study found that 62% of the
customers were not aware of CIS, and those who were informed had skewed knowledge in favour of
customers’ obligations against customers’ rights. The next section presents the theoretical and empirical
review about asymmetry of information on CRBs followed by the methodology, discussion of the
findings of the study, and lastly the summary, conclusions and recommendations. | en_US |
