U.S. credit firm launches credit score for Kenyan market

U.S. credit company TransUnion on Wednesday launched a credit score for the Kenyan market that will help lenders determine the credit risk of borrowers.

TransUnion Africa CEO Wachira Ndege told journalists in Nairobi that the tool will offer financial institutions and other credit lending facilities valuable insight into the credit health of their customers.

"The credit score will enable lenders to predict the likelihood of default of a borrower. Lenders will now be able to determine the interest rate that they will charge borrowers depending on their previous credit history," Ndege said.

The score ranges from 1 to 1000 depending on the credit worthiness of a borrower. Ndege said the tool will help in expanding credit to the retail sector.

Traditionally, the number of people with access to formal credit in Kenya has been limited due to the stringent requirements by financial institutions.

"Lenders require collateral in the form of assets before they can lend, but the credit score offers the financial institutions a method to determine whether a loan will be repaid," said the CEO.

According to the firm, the score will reward those who repay their debts with lower interest rates, while those how have a defaulted will be charged higher interest rates.

TransUnion Africa Executive director Steve Kamau said there are currently approximately 18 million people who access one form of credit or another.

"However, only 5 million have their information stored by credit reference bureaus in Kenya," Kamau said. Endi