A Transunion report has shown that Kenya’s financial institutions, including banks are at the heart of a fast-changing crisis fueled by the COVID-19 pandemic. According to the report, lenders remain under pressure to restructure loans and offer tax holidays to affected consumers. The theme of the report was Kenya’s Recovery Post the COVID-19 Pandemic.

Speaking at the launch of the report, Samuel Tayengwa, Director of product at TransUnion Kenya said, “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.”

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 also remains an ongoing and increasing concern, with TransUnion data putting annual losses from identity theft and loan stacking in the country at approximately Ksh. 13.3 billion.

“A credit score alone doesn’t give banks and financial institutions full context of a consumer’s financial position. It is 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.

The report provides a more holistic picture of a consumer’s ability to manage financial commitments and determines appropriate risk levels. This allows 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. This will provide 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,” concluded Tayengwa.