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Personal Finance

CRB Clearance Certificate – What You Should Know

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Credit rating is very crucial because it can affect your business, employment, and loan application. Being listed on the CRB (Credit Reference Bureau) puts a mark on your credit score. However, It is possible to improve your credit rating when you know the criteria used in measuring and determining your rating.

The CRB carries out measurements on how compliant you are at repaying your loan at the agreed time, your likelihood of default, and the quality of data you supplied to lenders.

credit-reference-bureau-certificate

What is the CRB Clearance Certificate?

It is a document that is issued to citizens seeking to be employed, start a business, or apply for a loan. Basically, a CRB clearance certificate is issued by agencies licensed by the Central Bank of Kenya to citizens seeking their credit reports. Firms use it to note an individual’s creditworthiness.

How to get a Credit Reference Bureau Clearance Certificate

To get a CRB clearance certificate, first make an application through a licensed platform. It will cost you Ksh 2,200 for the certificate. You can get your CRB Clearance/Certificate from: 

  1. Metropol Corporation
  2. TransUnion Africa
  3. Creditinfo Kenya

How to get your clearance certificate if you are not listed on CRB 

When you are not listed, you get a clearance certificate from any Credit Reference Bureau agency. After confirming your negative reports status, you can apply for your certificate. 

Licensed institutions for Credit Reference Bureau Clearance/Certificate 

The Central Bank of Kenya has licensed the following CRB firms to issue clearance certificates:

  1. Metropol Corporation
  2. TransUnion Africa
  3. Creditinfo Kenya

You can get your CRB certificate from any of these institutions by taking the following steps

1. Metropol Corporation

  1. If you are using Safaricom line, dial *433# on your smartphone
  2. Input your National ID Number
  3. Type in the referred agent number if you were referred by a Metropol agent, else put zero (0) to proceed.
  4. Confirm and recheck all your details.
  5. Pay Ksh. 100 through the Paybill number 220388. The amount serves as your registration fee and use your National ID number as the account number
  6. You will receive an SMS bearing your Crystobol PIN. Check your message to confirm the pin
  7. Visit the Metropol website. On the website enter your PIN
  8. Choose ‘Clearance Certificate’ and pay Ksh. 2,200 for the certificate through Paybill number 220388
  9. Read, understand, and follow the instructions provided. From there you learn how to download your clearance certificate.

2. TransUnion Africa CRB

  1. Text your full names to 21272 or 21CRB. They will charge you Ksh. 19 via SMS. To save the SMS charges, the TransUnion Nipashe app.
  2. Pay Ksh. 50 to PayBill number 212121 and use your National ID as the account number. The amount is a one-off payment.
  3. Finally, pay Ksh. 2,200, then email your M-Pesa/Airtel transaction information to cert@transunion.co.ke. In return, they will email you back the clearance certificate for download. 

3. Creditinfo Kenya

  1. Fill out the forms by following the instructions on their website.
  2. If you have any loan in arrears, you need to clear it to get your CRB clearance certificate. When you do not have a negative credit report, you will get a credit status certificate.

Why you need to have a CRB Clearance Certificate 

They issue a clearance certificate upon request and when you have a negative listing on your credit report. It is used for various purposes and by various institutions like:

  1. Financial Institution
  2. Business 
  3. Job application 
  4. Tender process, etc

How long does it take to get a clearance certificate from CRB?

It takes 1 to 3 days to be cleared off from CRB when you have a positive listing and be issued a Clearance Certificate. For example, when you are listed by a lender like Branch, KCB, or Shika, it will take 1 to 3 days for the CRB to clear your name.

How much is a CRB clearance certificate?

They require it to pay Kshs. 2200 as a processing fee for a Clearance Certificate.

Note: This fee is not a fine to clear your name on CRB.

Frequently Asked Questions on Credit Reference Bureau Clearance Certificate 

At what point do I need to apply for a clearance certificate?

A clearance certificate is issued upon request by an individual. 

Does a clearance certificate clear individuals from their credit debt? 

A Certificate is a confirmation and does not clear an individual off their credit debt. Whether you have paid for your clearance certificate or not, decisions will be made based on your credit history. 

How much do I pay to get cleared with a CRB?

You do not pay the Credit Reference Bureau to get clearance. All you need is an excellent credit report. Clear all outstanding balances you have with any financial institution. 

Is the Ksh. 2200 paid to the CRB as a penalty to clear your name from the CRB? 

The Kshs. 2200 you pay is known as the processing fee for a Clearance Certificate.  It is not a fine to clear your name on CRB.

How long is a default listing kept on CRB? 

A default listing is retained on the Credit Reference Bureau for 5 years from the last date of payment.

How can I apply for a Clearance Certificate online? 

Visit the website of any approved agency and apply online.

Conclusion 

To get your clearance certificate, all you need is to apply with either Creditinfo, Metropol, or TransUnion. After confirming your status, you can apply for the CRB certificate.

Try as much as possible to clear all outstanding debts. A zero listing gives you your clearance certificate with less stress.  

Asset Based Lending- Meaning And How it Works

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This article seeks to reveal all you need to know about asset based lending in Kenya. In business, there are times to balance out corporate finance structure and maintain flexibility.

There are also times to operate cash, grow, consolidate funds and fund different acquisitions. For these to happen amid a lack of funds, it takes only a loan to solve these credit lines.

Most companies and businesses in Kenya rely on asset based lending to manage their financial resources. It is the financial outlet of last resort. For companies and businesses with many assets, it is the last tool in their business financial tool kit.

Let’s discuss asset based lending in Kenya and all you need to know.

Asset based lending

What is an Asset? 

An asset is a tangible equipment and machines and property a company owns that is used in running the business. Assets are long term physical or intangible properties. They can trade assets for liquid cash. 

What is Asset Based Financing in Kenya? 

It is a way companies and businesses in Kenya use collateral to get liquid cash. Collateral can come as asset, property, inventory, or account receivables.

Asset based lending in Kenya is mostly used by businesses and companies and not individuals. It is more flexible and easy to access.

How Asset Based Lending Works in Kenya

Asset based lending works by a business taking out a loan to meet demands by often an asset as a collateral. For example, Mr. Z opened a restaurant and invested more, but ran short of cash to offset payroll expenses.

The business then sorts for loans. He gets the loan by using his equipment or other assets as collateral. The conditions of asset based lending are on the principal amount and the value of the asset. Lenders also weigh the easy conversion of the asset to liquid cash in case of loan default.

Moreso, the cash is often less than the asset. The asset weighs higher and more valuable. The interest rate here is often lower since the borrower has reduced the risk of the loan by providing a collateral. 

What Asset Based Lending Does in Kenya

Asset based lending solves a lot of need and they include:

  1. It covers short term needs in Kenya
  2. Companies and businesses use it to buy time, while shares or bonds in the capital market take time to arrive.
  3. It stabilizes businesses with physical assets to solve their immediate needs
  4. Businesses use to bridge the gap in companies or maintain cash flow
  5. It covers the working capital and also used to start up a business or company financing 
  6. It is attractive, and an option for companies and businesses that stretches its credit limits.

5 Types of Asset Based Lending in Kenya

The various asset based lending in Kenya include:

  1. Mortgage financing 
  2. Account receivables 
  3. Logbook financing 
  4. Equipment financing 
  5. Inventory financing 

6 Examples of Assets Used in Asset Based Lending 

The lists of assets used for asset based lending are:

  1. Account receivable
  2. Inventory
  3. Marketable securities
  4. Property
  5. Plant
  6. Equipment 

How to Derive the Amount of Asset Based Lending 

For the amount given out by a lender to a company or business for asset based financing, it is calculated. They calculate it based on the loan-to-value-ratio. Lenders in Kenya weigh the asset first and find out its market value.

Once it is ascertained, depending on the lender, 70% to 80% value of the security is issued out. The amount depends on the type of asset provided. 

Take note that lenders are willing to offer higher loans for liquid wastes that can easily be converted to liquid cash. That is, loan-to-value-ratio = loan amount/asset value. 

Loan amount: This is the amount the lender is willing to lend out

Asset value: this is the value of the asset being used as collateral for the loan. 

5 Advantages of Asset Based Lending 

The good side of asset based lending are:

  1. It is easier to get
  2. They offer asset based lending with low interest rate
  3. The cash serves well in time if emergency 
  4. It involves fewer commitments and covenants 
  5. You can borrow daily and still pay back.

10 Financial Institutions in Kenya that offer Asset Based Lending 

This is a list of some banks that you can access asset financing in Kenya.

  1. KCB Bank
  2. NIC Bank
  3. Co-operative Bank
  4. I&M Bank
  5. HF Group
  6. Equity Bank
  7. Barclays Bank
  8. Stanbic Bank
  9. Family Bank
  10. CBA Bank

10 Saccos in Kenya that Provide Asset Based Financing

Here is a detailed list of a 10 Saccos in Kenya that provide asset based lending in Kenya:

  1. Mhasibu Sacco
  2. Unaitas
  3. Jamii Sacco
  4. Finlemm Sacco
  5. Wananchi Sacco Society Ltd
  6.  2NK Sacco Society Ltd
  7. Nyati Sacco Society Ltd
  8. AMREF Sacco
  9. Mwalimu Sacco
  10. Hazina Sacco

Another Name for Asset Based Lending 

Asset based lending is also known and seen as commercial finance and asset-based finance.

Conclusion 

Some companies prefer to use asset financing in place of traditional funding, as they based the funding on the assets themselves, rather than the bank’s perception of the company’s creditworthiness and future business prospects.

Five C’s Of Credit- All You Need Know

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Loan application and it’s underwriting processes are a practice of analysing, structuring, documenting, and approving credits. Therefore, to achieve all these, lenders need tools to guide them through the process. Also, while considering the risk in credit and following the fact, it is relevant to emphasize on the need to protect financial institutions and individual lenders, hence the five Cs of credit. The 5Cs are fundamental tenets of lending loans.

With the result of the recent CGAP in Kenya, it was noticed that 50% of digital borrowers repay their loan late and default, respectively. To investigate and describe the creditworthiness analysis methods, strategies and procedures, they form requirements within the analysing process.

Thus, let us discuss the 5Cs of credit and all you need to know.

Five C's of credit

What are Five C’s of credit?

The five Cs of credit are a gauge or a system used in weighing creditworthiness of borrowers. It gauges five features of the borrowers, which are capacity, character, capital, collateral, and conditions. Moreso, it analyzes the probability of loan default and capacity for repayment.

No five Cs are more important than the other, but most lenders gauge using capacity. The goal is your ability and willingness to repay your loan. 

Understanding the five C’s of credit in Kenya 

The 5Cs of credit in Kenya have to do with a series of credit analysis by a lender to find out the risk associated with a loan. Regardless of the type of loan you need, the lender is interested in how you will pay back the loan.

In Kenya, credit analysis is governed and controlled by the “five Cs”. The borrower’s character, capacity, condition, capital, and collateral. These 5 components make up the credit analysis. It also helps the lender understand you as a borrower and   your creditworthiness. 

Finally, it is pertinent as a Kenya citizen that you understand these five Cs . It would prepare you for a loan application process and give you the edge you need.

Five C’s of credit in Kenya

In gauging creditworthiness of potential borrowers, 5 features of five Cs are considered. They are:

  1. Character/credit history
  2. Capacity
  3. Collateral
  4. Capital
  5. Conditions

Character/credit history

This refers to the borrower’s repayment track records. Reputation appears in your credit history. It is generated by the CRB in Kenya and contains how much you borrowed and your loan defaults and repayments. Often, if you are looking for jobs, you might be asked to get your credit certificate.

Many lenders also gave a minimum credit score and requirements before a borrower is eligible. Also note that a low interest rate is offered to borrowers with an excellent credit score.

Capacity

This is the ability of the borrower to repay the loan. It is often assessed based on the borrower’s debt-income ratio. They obtained it by adding the potential borrower’s monthly debts payment and dividing it by the gross salary or income.

The lower the DTI, the higher the chance. The length of hon and the job stability are also considered as part of the capacity of the borrower. 

Collateral 

Collateral prices, the risk of loan. They presented it in exchange for loans. It assures the lender that he can get something back in case of default. It is the object of the loan application.

They also referred to as secured loans. Loans secured with collateral often have low interest rates and longer loan duration such as with mortgage loans providers.

Capital

This includes the down payment of loans to show more seriousness and willingness to repay loans. This down payment can make lenders comfortable in extending the loan. A large capital by the borrower reduces the risk of default.  

Conditions

This includes the conditions for the loan, the principal amount, and the interest rate the loan would attract. This also explains what the borrower is using the loan for.

These are the things the lenders find out. The reason behind every loan influences lenders’ decisions for approval. 

Basics of five C’s of credit

The five-Cs-of-credit methods and evaluation are rooted on;

  1.  Qualitative and
  2.  Quantitative measures.

Lenders approve and grant loan applications based on borrower’s credit reports, credit scores, income statements, and other documents. Documents relevant to the borrower’s financial situation are the only one considered. Take note that the information about the loan itself is also considered. 

How lenders analyse the five C’s of credit

Different lenders analyse it differently based on how they want it. They can use any of the 5Cs as a basic gauge for analysis. Let us quickly look at the 5Cs and see how lenders analyse it. 

Character: Lenders look at:

  1. Credit score/history 
  2. Financial reputation 
  3. Other financial credit utilisation 

Capacity: Lenders analyse it by looking at:

  1. Cash flow
  2. Debt-to-income ratio
  3. Debt service ratio

Capital Lenders will want to see:

  1. How much you have invested in your business
  2. Your business net worth 
  3. The real estate you possess 
  4. Ratio of your debt to equity 
  5. The equipment and assets you have

Collateral: Financial institution can perceive it in the form of: 

  1. Your Valuable assets 
  2. Depreciation rates of your assets 
  3. Account receivables

Conditions: conditions include other factors that will influence your loan repayments. They are:

  1. Economic trends 
  2. Issues that are predominant in your business or your workplace
  3. Tangible reasons for the loan application. 

Why are Five C’s of credit important 

The importance of five C’s of credit are:

  1. important?It helps lenders determine the borrower’s credit limit and the interest rate.
  2. It influences, to a large extent, the borrower’s loan approval.
  3. The 5Cs, when properly analysed, give the lender conditions that the borrower would pay back.

How to improve on the five C’s of credit by a borrower

Improving on the 5Cs of credit by the lender involves distinct steps. They include:

  1. Make your payments early
  2. Create a mutual relationship with lenders
  3. Reduce your debts by clearing outstanding debts
  4. Increase your cash flow
  5. Record all your personal investments and knowing off hand
  6. Gain and purchase assets
  7. Control the way you sound. Prepare yourself and use all your loans prudently. 

Frequently asked questions

Of importance, let us recap. The 5 C’s of credit are Character, Capacity, Collateral, Capital, and Conditions.

Why are they all important?

Lenders use these criteria to know if you are qualified for a loan. Eligibility is first considered before a loan application process.

These criteria determine your interest rates and credit limits. They also help determine loan risk and the likelihood of the borrower repaying at the agreed date. 

Is there a sixth ‘C’ of credit?

Often people refer to the credit report/history as the 6th C of credit. It is not yet verified.

Conclusion 

Each financial institution has its own method for analyzing a borrower’s creditworthiness. Using the five Cs of credit is common for both individual and business loan applications.

Of hierarchy, capacity basically, the borrower’s ability to generate consistent income to pay off the interest and principal ranks as the most important. 

But applicants who have high marks in each category are more apt to receive bigger loans, a lower interest rate, and more favorable repayment terms.

These factors are what lenders used to gauge your creditworthiness, but make no mistake. It’s also important for the financial health and stability of your business to check the 5 Cs of credit analysis on your own from time to time. Whether for lenders or for yourself, use this guide to help you strengthen your business’s 5 Cs of credit!

6 ways to manage debts- All you need to know

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We will explore 6 ways to manage debts. Nevertheless, amid the current pandemic and the poverty it brought to everyone, people borrow for survival. Notwithstanding the economic crisis, if you have debts, you have to keep up with payments and not allow it to get out of control.

Make a list if you are confused. You can use your credit report to make the list. Then pay off your debts bit by bit while you juggle payments on the other you are not currently paying. Remember, everyone with even a bit of debt has to manage it, else it gets out of control.

6 ways to manage debts

What is debt management? 

Debt management is the procedure or ways you plan to control your debts. It is a way of curtailing extravagant spending which might get out of control. Debt management also has to do with strategies of designing a monthly budget and paying off outstanding debts in order to be debt free. Being debt free gives peace of mind and integrity.

6 ways to manage debts

You have been wondering ways to manage and tackle your debts and ensure you have control over it. Below are 6 ways to manage debts and they are:

  1. Be sure you identify how much you owe
  2. Make monthly repayment on time
  3. Raise a calendar to guide your monthly repayment
  4. Identify the debt to pay off first
  5. Make sure to commit a payment every month
  6. You can make use of your retirement fund and consult your credit counsellor

Be sure you identify how much you owe

If you know exactly how much you owe, you will know how to repay to repay your debts faster, and you will not miss any. As a first step, write all the debts, creditors, their total amount, and their due date. Be sure to write out everything on your list. Then Start with either the one with the nearest due date. Pay sequentially till you clear off all debts.

Make monthly repayments on time

Pay off as much of your debt as you can each month and on time. Pay at least the minimum amount due on each loan and early enough before the due date. This will protect your credit rating. If you can afford to pay more, pay off the loan with the highest interest rate first. As you pay off each loan, start paying more on the next debt in line.

Raise a calendar to guide your monthly repayment

If you have more than one debt, ensure that you make all monthly payments on time, create a monthly calendar and a schedule. You can show which bill you have cleared or still owing and note the bill payment date. The calendar will show detailed information on all your debts and how you plan to pay them off.

Identify the debt to pay off first

Determine which loans you should pay off first; credit card debt and payday loans usually attract higher interest rates than other obligations. Prioritize debts with high interest rates. Attend to it first and it goes on sequentially.

Make sure to commit a payment every month

 Make sure you at least pay a minimum amount each month rather than not paying anything. By doing so, you will keep your debts from growing, ensuring that your account remains in good condition. However, when you miss payments, it becomes difficult to pay the increased amount, which can lower your credit score.

In the future, you may find it difficult to qualify for the most helpful loan because of bad credit. But if your credit score is good, you can get a loan anytime.

Make use of your retirement fund and consult your credit counsellor

Consider talking to a financial planner or credit counselor if you cannot figure out how to reduce your debt. Credit counseling agencies help people deal with their debt problems. With their help, you can develop a plan, help you apply for your retirement fund and get you out of debt.

5 Tips on how to achieve debt management 

The ropes to achieving these 6 ways of debt management are:

  1. Always bear the risks and consequences of debt owning in mind
  2. Be mindful of your integrity. This would make you source for genuine ways of managing debts
  3. Continue to look for genuine ways to make more money
  4. Never relax till you make the last payment 
  5. Be patience enough and hold still 

4 disadvantages of growing debts and joking with debt management 

The disadvantages to debt growing are:

  1. It stains your integrity 
  2. CRBs shortlist your name and you won’t be able to borrow from any lender again
  3. You salvage your business and such comes at a steep price
  4. People lose trust in you and financial institutions wouldn’t want to lend you money again.

Conclusion 

You should read the fine print carefully before working with this agency. Debt settlement plans can come with serious stipulations. Just as losing weight takes time, so does getting out of debt. But diligence can make it happen. Don’t fret if you need to make adjustments along the way or if you slip up. The answer is not to do a quick fix, but to change your attitudes and behaviors to realize your financial goals.

Debt Consolidation Loans in Kenya Explained

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Imagine being able to take a loan to cover your debts and liabilities. As strange as it sounds, it’s real as it gets. With favourable terms of the loan which include a lower interest rate, lower monthly payment, or both.

Individuals can use debt consolidation loans as a tool to deal with student loans and other forms of liabilities.

What is a consolidation loan? 

We can see the term debt consolidation as the act of taking out a new loan to pay off other liabilities and consumer debts. These loans are generally unsecured ones. Here they combine multiple debts into a single, larger piece of debt, usually with more favourable payoff terms. These favourable payoff terms include a lower interest rate, lower monthly payment, or both. Consumers can use debt consolidation as a tool to deal with student loan debt, credit card debt, and other liabilities. 

Key things to know about consolidation loans?

  • Debt consolidation is means taking a loan to pay off other debt and liabilities. 
  • Debt consolidation loans do not entirely erase the original debt. They only transfer a benefactor’s loan to a different lender or type of loan.
  • There are two major types of debt consolidation loans. They include secured and unsecured.
  • Benefactors can apply for debt consolidation loans, lower-interest credit cards, and special programs for student loans.

How does debt consolidation loans work?

As stated above, debt consolidation is the act of using a different form of financing to settle other debts and liabilities. When a consumer is saddled with different debts, they can apply for a loan to merge those debts. Those debts are standardized into a single liability and paid off. They then make payments to the new debt until the debtor settles it in full.

Most consumers can apply through their bank credit union, or credit card company as the first step of the application process. A consolidation loan is a great way to start, especially if you have a great relationship and payment history with your institution.

An important point to note is that debt consolidation loans do not entirely erase the original debt. Instead, they simply transfer the benefactor’s loan to a different lender. For actual debt relief/ or for those that don’t qualify for loans, it’s advisable to look into debt settlement. Debt settlement is available to reduce consumer’s obligations rather than the number of creditors.

2 Types of Consolidation loan

There are two major types of debt consolidation loans. They are secured loan and unsecured loans.              

Secured loans are usually backed by the borrower’s assets, such as a house or a car. The asset here works as collateral for the loan.

Unsecured loans are not backed by any asset. This type of consolidation loan is usually very difficult to get. They also have higher interest rates and lower qualifying amounts compared to other forms of loans. 

With either of the loans, interest rates are typically lower than the rates charged on credit cards and other forms of loans. Also, in most cases, the rates do not fluctuate, so they do not vary over the repayment period.

Requirements for getting a debt consolidation loan?

Before qualifying for a consolidation loan, applicants must;

  • Possess a letter of employment,
  • Have two months’ worth of statements for each credit card or loan you wish to pay off.
  • Possess letters from creditors or repayment agencies.  
  • Provide a copy of the latest bank statement, reflecting three salary deposits 
  • Have the income and creditworthiness needed to qualify, especially if you’re going to a brand new lender.

Although the documentation you will need often depends on your credit history, the aforementioned documents are quite essential.

Advantages of consolidation loans

The following are the major importance of consolidation loans;

  • Debt consolidation is a great tool for people who have multiple debts with high-interest rates or monthly payments.
  • Debt consolidation loans can help your credit score. Settling the portion of the principal loan sooner can keep interest payments low. This means less money out of your pocket. This can help boost your credit score, making you more attractive to future creditors. 
  • Taking a debt consolidation loan can give you a tax break chance. The internal Revenue Service permits deduction of interest on any unsecured debt consolidation loans.
  • Going through the debt consolidation process can reduce calls or letters from the collection process. As long as the new loan is kept up to date. 

Disadvantages of consolidation loans

Debt consolidation loans have their downsides too. These disadvantages include;

  • Debt consolidation loans have longer payment schedules. This means that applicants might pay more in the long run.
  • By transferring existing loans into a brand new one, there may initially be a negative impact on the consumer’s credit score. This is because credit scores favor longer-standing debts with longer, more-consistent payment histories.
  • Ending the old credit accounts and opening a single new one may reduce the total amount of credit available, raising the debt-to-credit utilization ratio.
  • Consolidation loans can also cause potential loss of special provisions such as interest rate discounts and other rebates.

Conclusion 

Debt consolidation rolls and tackles multiple liabilities and debts, typically high-interest debt such as credit card bills, into a single payment. Debt consolidation might be a great idea for you, especially if you can get a lower interest rate. That will help you reduce your total liability and reorganize it so you can pay it off faster.

CRB status: How to check your CRB status in Kenya

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We will explore CRB status and how to check your CRB status in Kenya if you default. The law in Kenya entitles borrowers to get a free CRB report once a year.

If you want to go for an additional report within that same year, you have to pay for it. Thus, they urge borrowers to check their CRB status and get a report.

Hence, make sure the information on the report is up to date. Try as much as possible to pay outstanding loans.

We will take you through how to painlessly check your status and get your CRB report.

What is CRB 

CRB stands for credit reference bureau. It is an organization licenced by the central bank of Kenya to collect and analyse data on loans from lenders and financial institutions.

About Credit Reference Bureau

This is a big organization that checks and monitors the attitude of borrowers to enable lenders to reduce loan default. They also use it to tackle nonperforming loans issues. In addition, they were licenced and legislated CRB legally on 11th July 2008. They also control and maintain stability, effectiveness and access to financial services.

What is CRB status?

It is the state of your loan repayment as it concerns curbing nonperforming loans. The status displays if you have defaulted or paid off all outstanding loans. The status also displays your eligibility to go for another loan. In addition, if you do not pay off the previous loan, you will get blacklisted and not liable to go for another loan from some big lenders. It is important you clear your outstanding loans because some companies, when they want to employ you, ask for a CRB clearance certificate. 

How to check your CRB status

There are three CRBs licenced by the central bank of Kenya to control, collect, manage and share financial information. They are:

  1. Metropol Corporation
  2. TransUnion (CRB Africa)
  3. Creditinfo

Metropol corporation

To use this CRM agency to check your status, go to their website. You can also download their Crystobol app or dial *433#. To check your score, follow the process below:

  1. You have to pay ksh. 50 as the registration fee with the paybill number 220388
  2. Make use of your national ID number as the account number
  3. Then you will receive an SMS with your unique PIN details, a reference number, and a special link.

For credit score

Pay ksh. 150 to get your score per year. They will award marks between 200- 900. If your mark falls below 400, it means “Low rating” showing that you defaulted. Rating near 800-900 means you have a high score and don’t have a loan default.

For credit report

You will pay ksh. 250 to get full detailed information on how financial firms have listed you.

For credit clearance

After clearing your outstanding loans and you are no longer owing, they will issue you a clearance certificate at ksh 2200 if you need it.

Transunion CRB Kenya

To check your score, follow the procedure:

  1. Send your full personal name to 21272
  2. Input your ID Number 
  3. Select credit status
  4. Receive your CRB status

For credit report

Pay ksh. 650 in order to view or see your credit report and institutions that have listed you

Clearance certificate

For your clearance certificate, you will pay ksh. 2,200 and make sure you have paid off all your outstanding loans.

Note: you can access TransUnion app on google play store,

Credit info CRB Kenya

To register under this CRB in order to get your credit score and other necessary information. Visit their site, after registration, you will receive your credit report in your email address. Everything they do is sent to their customers’ email address. 

What is CRB clearance certificate?

It is a document that shows that a customer has no nonperforming account. It is a certificate given to an individual or citizens of Kenya after checking their credit score and report. Firms use it to know the individual they are employing and his/her credit status.

How to Check CRB Status through SMS Code *433#

To check your CRB status using an SMS code, you pay ksh. 100. Below is the procedure:

  1. Dial *433#
  2. Input your ID number (make sure is the phone number associated with your M-Pesa account)
  3. Make use of the agent code: 222000
  4. Confirm the details
  5. Pay the registration fee
  1. To make payment, go to M-Pesa and choose Lipa and M-Pesa
  2. Enter the business number @ 220388
  3. Put the account number @ your ID no
  4. Input the ksh. 100
  5. Send it
  6. You have your details displayed.

When is an individual’s negative listing submitted to a CRB

It takes 90 days. Banks give individuals 90 days and mobile lenders give 30 days. After the duration, the person gets a notification. They list them If they don’t make any repayment.

Reasons for checking CRB score or knowing your CRB status

There are lots of reasons why citizens of Kenya check their CRB status. The reasons are:

  1. Find out the true state of their credit performance
  2. To also know if their loan repayments have been reflecting on the lender’s dashboard. 
  3. To give them peace of mind or sort out ways to pay off loan default.

What is CRB Negative status

CRB negative status means being listed on CRB badly or negatively for loan default or forgery.

Do lenders pay to have your records updated by a CRB

The answer is NO. No charges are applied. Sharing data with CRB by lenders is free of charge.

Errors on CRB status/Report

They often give wrong credit reports. When you detect the error, you can dispute the information by:

  1. Contacting the CRB that gave you the report
  2. By filling the form given to you by the CRB and highlighting the errors
  3. The CRB contacts the lender or financial institution that gave out the data for confirmation
  4. The lending institution will investigate the error and give their feedback within fourteen (140) days. They confirm:
  5. If the information is correct and should not be charged
  6. Should the error be true and deleted
  7. If the information is not up to date and correct changes made immediately.

When CRB has being contacted, and the report or status does not yet satisfy borrower

In this case, they allow the borrower to append the summary of that dispute on their credit report.

Note: You can visit Tatua center. It is an alternative dispute resolution center. They deal with CRB related issues and disputes. You can access them via their website.

Can I get a loan if I have a negative CRB status

 The quick answer is “Yes”, you can. The thing about ‘negative credit’ is that not all financial institutions see it in the same way. Different financial institutions have different metrics when considering someone’s credit status.

Contacting CRBs Organizations

Metropol contacts

Their phone numbers are: (+254) 20 26 89 88 1  OR 0709 834 000  or 0709 228 000  or 0730884000

Email them @ creditbureau@metropol.co.ke

Work Address: Barclays Plaza, 9th Floor, Loita Street, Nairobi

Creditinfo details and contacts

Their phone numbers are: +254 735 880880  or +254 718 842833 or 0709593000

Email them via cikinfo@creditinfo.co.ke

Their address in case you wish to visit them: Park Suites, Parklands Road, Nairobi

TransUnion CRB Contacts and details 

Name: Credit Reference Bureau Africa Limited (TransUnion)

Phone numbers: +254730 651 000 or +2540203751344

You can email them @ info@transunion.co.ke

Physical Address: 2nd Floor Delta Annex, Ring road, Westlands, Nairobi

SMS: 21272

Conclusion

A lot of borrowers make a lot of effort in loan repayment, but not get rewarded for it. CRB is here to give you a full report or status on your loan information. Kenya has made substantial progress in improving financial control and efficiency through CRB. check your status and try as much as possible to pay off your outstanding loan. You might find it interesting to know that there are loan apps without CRB in Kenya.

Loans and Advances Explained – Meaning and All You Should Know

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The need to make a sound financial decision when borrowing funds for your personal or organisational need cannot be over emphasized. Basically, when individuals choose to go for funds to expand a business, personal need and purchase of land, the best option is a loan.

But when institutions seek to raise a short-term find to cover salary, purchase of materials and other office expenses, an advance is the best.

Stay tuned. We will discuss the differences between the two terms and in this article. 

loans-and-advances-in-kenya

What is a Loan?

A loan is a sum of cash or fund that you borrow and expected to pay with an interest on a specific due date. A loan is also an act of lending of money by individuals, financial institutions, and other entities. Some even borrow airtime.

The borrower incurs a debt which 8sbmwant to be repaid. The lender and borrower agree on the interest rate and repayment terms.

Moreso, loans are often secured with a collateral, credit score and other required entries which helps to reduce the risk of the loan.

Objects of Loan Contracts 

Contracts of loans includes objects like:

  1. The principal amount
  2. The repayment amount
  3. Number of repayment duration 
  4. The repayment terms and
  5. Collateral, if there is any.

Types of Loans

Types of loans include:

  1. Secured loans
  2. Unsecured loans
  3. Personal loans
  4. Fixed-rate loans 
  5. And variable rate loans

What is an advance 

An advance is a means of finding rendered by the bank to other institutions or entities to meet up a short-term need (often less than a year). 

Facilitation in advances 

The key facilitation of advances includes:

  1. Primary security: This includes the promissory notes, and here the bank stands as a priority to repay the loan before any other parties involved. 
  2. Collateral loan: This is more like a mortgage of property like land, buildings and other fixed assets.
  3. Guarantees: It is given by the partners, promoters, chief executive officers and so many others.

Types of Bank Advances 

Types of bank advance we have are:

  1. Short-term loans 
  2. Overdraft 
  3. Bill purchase
  4. Cash credit 

Conclusion 

Normally “Loans” and “Advances” are seen as “Loans”. But technically, and for all things balanced, the two terms are distinct.

As it stands, a company or an individual who needs funds for personal use or capital projects shall get a loan.

The agreement is between the borrower and the lender and the latter agreeing to pay the sum with an interest. But a company needs to solve a short-term financial need shall go for an advance. So loans and advances have been explained properly in this article.

Non-Performing Loans in Kenya – Meaning And All You Should Know

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Learn about non-performing loans in Kenya and all you need to know.

Online lending platforms and banks enjoy huge profits from interest on loans they render to the citizens. Because of poor conditions and dwindling liquidity, most individuals cannot turn up and default in loan repayments.

A nonperforming loan is a burden to both the lenders and the borrower. In addition, where interest repayment on principal passes 90 days, it is known as nonperforming loans.

This article contains everything you should know about nonperforming loans. 

What are Non-Performing Loans 

It is a sum borrowed upon which the borrower has not made the scheduled payment for the specific time. It is a loan that is in arrears or months late.

Non-performing loans in Kenya are loans where the borrower defaults and does not make payment for the principal with the accrued interest for some time.

Types of non-performing loans

NonPerforming loans can come in two forms:

  1. Where an agreement or amendment to the original agreement can delay a loan for 90 days and have it refinanced, capitalized and roll-over into a new loan
  2. When the lender says or no longer believes that the borrower will make payment in less than 90 days

Minimising non-performing loans

Minimising nonperforming loans deals with reawakening and strategizing all dimensions of lending procedures and developing a proper recovery way. We can minimize it by:

  1. Taking proper records and detecting Nonperforming loans early
  2. Establishing clear defaulting punishment
  3. A good habit of working with the customers and sending reminders
  4. Thorough management analysis
  5. Development of comprehensive strategic plans
  6. Never rely on recommendations, references, collateral or promises
  7. Steady and thorough financial statement analysis

Causes of non-performing loans

Factors leading to nonperforming loans are:

  1. Irresponsible borrowing and excessive expectation of further income
  2. High-interest rate
  3. Unemployment and shake in cash flow
  4. Inflation
  5. Economic downturn and GDP
  6. Inappropriate credit risk and poor credit appraisals.

What non-performing loans does

Two principal things NPL do are:

  1. They Contract credit supply
  2. They distort the allocation and dispense of credit/loan/cash.

How are non-performing loans calculated?

To calculate nonperforming loans, you divide the nonperforming loan total by the total amount of outstanding loans in the lender’s profile

Disadvantages of non-performing loans

Disadvantages of NPL are:

  1. Reduction in net interest income
  2. They reduce cash flow
  3. More and extra capital requirement
  4. High cost of funding and low ratings
  5. They also reduce risk quest for new and more lending
  6. Extra time for servicing, cost and problem-solving

Solutions to non-performing loans

Solutions to nonperforming loans are:

  1. Good and sound lending policies at the time of origination of the loan
  2. Evaluation of opportunities and risks for each loan
  3. Deduction in net interest
  4. Robust internal risk rating models by lending platforms and banks
  5. Reduction in risk appetite
  6. Constant warning and being aggressive in collection of loans
  7. Selling and sharing risks in nonperforming loans.

Conclusion

Nonperforming loans are very harmful and deadly. It kills the economy. If we analyse the causes, we can change our strategies to control it.

Borrowers in Kenya should look into borrowing unnecessary loans. Have your business idea planned out well before borrowing. Have sources and means of paying back to avoid default. 

Importance of loan and financial literacy- Explanations

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Need to know about the importance of loans and financial literacy? You have never been taking loans seriously? Don’t care when banks would call you up and try to sell you on a credit card, or personal loan?

You weren’t looking to buy a car or a house, so what is the point? Having knowledge about loans and finance matters. Don’t wait until you decide to open up a small business loan to start taking a serious look at money, loans, and finances.

Read along with me to find out the importance of loans and financial literacy.

Importance of loan and financial literacy

What are loan and financial literacy?

Loan and financial literacy are important for everyone. It encompasses a general awareness of money matters and financial decision-making that affects you, your family, and your community.

Everything you need to know about the importance of loans and financial literacy

Loan and financial literacy are the keys to financial empowerment. Yet many people are not financially literate. Financial literacy is important not just for individuals, but for our country as a whole.

We should make this a requirement instead of an elective subject in high school. People need to focus on financial literacy courses as much or even more than they focus on driver’s education courses when they are young.

Also, in an age where most people have to pay for their own education, debt is almost always a factor. Some students graduate with exorbitant amounts of debt or loans that they might not even be able to repay until after they are finished with college and have started working.

I guess equipping yourself with the knowledge of how the loan and finance system work, will be of great benefit.

Importance of loan and financial literacy

Good loan and financial literacy are vital to any person’s protection, security, and well-being. But with building positive loan repayment and financial habits, and understanding the numbers and not just the theory, matters a lot. The following are the importance:

  1. Loan and financial literacy will help you develop important money skills for life, understand your credit score, day-to-day cash flow, and how to save and invest money.
  2. When faced with financial problems or choosing the right debt products, you will be equipped with the savvy, knowledge, and self-confidence needed to deal with them effectively and positively.
  3. No matter your occupation, one thing is true, you need to manage your money at some point. Therefore, it helps in money management.
  4. Whether you are a college student looking to pay down student loans, knowledge of loans and finance is needed.
  5. Looking to save for a home or even further in the future, I guess once in a while, take loans, so you need to know how it works
  6. If you have a retirement account, having some level of loan and financial literacy under your belt is important. This is especially true now that you can literally conduct your life and finances with a cell phone.
  7. It is easy for people to make mistakes with their money, loans, and finances, where even simple actions like misreading an invoice can cost you thousands. So watch out and learn all it takes to avoid making mistakes a second time.
  8. With the knowledge of loans and finance, you will find out that inflation has not been as positive as it appears at first sight. Most times inflation and other factors might affect your finances and force you to take loans.

How to get be loan and financial literate

Where can you start from? With regards to understanding loans and personal finance, to start gaining the knowledge, start from:

  1. Knowing the basics of loans and finance.
  2. This can be followed by understanding the basics of credit scores, debts products, and investment strategies.
  3. This can also be followed by gaining insight into how to manage credit scores, knowing about debt consolidation, and managing loans and money.
  4. Get links from reliable sources online and offline, which can help you in getting started with understanding personal loans and finances.

What loan and financial literacy is not?

Loan and financial literacy does not just mean knowing how to sign a cheque or filling in the right paperwork for getting a loan. It is about knowing the basics of money.

How banks work, how financial markets function, and so on. Our ability to make sound economic decisions depends significantly on the level of our education and knowledge.

Tips on knowing that you are loan and financially literate

Loan and financial literacy can include but are not limited to:

  1. Understanding and knowing the importance of how to budget one’s finances to avoid taking loans.
  2. Having deep knowledge of savings and investments.
  3. Knowing the basics of the credit system, debt products, and debt repayment
  4. Understanding the basics of laws that govern finance
  5. Have a basic understanding of your income, expenses, and savings, ready for emergencies and retirement.
  6. Understanding what outstanding debts, assets, and other basic financial health indicators mean
  7. Knowing the basics of taxes and their elements
  8. The basic understanding of inflation, profit, loss, growth, de-growth, appreciation, and depreciation.

Conclusion

This article exposes everything you need to know about the importance of loans and financial literacy. Since money and its need is indispensable, it is recommended you reflect upon the importance of loan and financial literacy. 

Unfortunately, most of the formal education systems across the world skip this essential part of education. It is hence easy to say that you need to focus on working towards being loan and financially literate.

Loan Documentation Process in Kenya

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The loan documentation process includes the following terms: application, examination, assessment, choice documentation, directions, and collection of loans. The documentation process in Kenya for commercial banks, microfinance banks, Saccos, and private financial institutions is all for their best interest. This article will get you through the loan documentation processes, the steps for a commercial loan, and the process for preparing a loan document.

Loan documentation process in Kenya

Understanding the loan documentation process in Kenya

When you want to secure a business loan in Kenya, you will be required to fill out a lot of forms as attachments and all this works to determine how the lender will approve your loan application. 

There are several standard terms used by lenders in Kenya, which are often incorporated in facility letters, loan agreements, or offer letters, which are produced by banks in-house. Law firms prepare security documents for them too. For higher-value loans, most banks/lenders contractually instruct an external lawyer to prepare the loan documentation. Typically, the loan agreement would be patterned with legal backup.

The loan documentation process is an important one, as it is how the lender evaluates the borrower and decides whether to provide the loan.

What is the loan documentation process?

The loan documentation process includes ways of identifying the borrower, documenting the collateral and other papers, attaching the proper instruments, and perfecting the Security Interest. With all these checklists noted and filed, the lender and borrower can now go ahead with the loan agreement process.

How do I prepare a loan document?

To prepare loan documents, you first need a good deal of planning and other things which include:

  1. Review your personal financial statement.
  2. Properly review and state a tangible way to use the Funds 
  3. For business, you need to prepare your P&L Statement, Personal Tax Returns, and business debt schedule.

How do you document a loan?

The loan documentation agreement should include the following information:

  1. Names and addresses of the lender and the borrower.
  2. Amount of the said loan
  3. Date of loan disbursement
  4. Interest rate
  5. Date of repayment 
  6. Include also the APR and other information about the consignor, if applicable

4 Stages of the loan documentation process in Kenya 

The loan documentation process in Kenya involves several stages. These are: 

  1. Application 
  2. Underwriting
  3. Disbursement and 
  4. Accounting for the loan or repayment 

Interest rate loan documentation process 

In Kenya, there are two main types of interest rates:

  1. Fixed rate and 
  2. Variable rate.

The Central Bank of Kenya (CBK) rate is used as the reference point for setting the interest rate on loans in local currency. Banks usually apply a margin over LIBOR to loans denominated in foreign currencies (e.g., US dollars).

Conclusion

The loan documentation process in Kenya is not as tough as most people think. As a matter of fact, it is quite simple because most financial institutions offering loans, mortgages and other financial services take the same steps to completing the loan or mortgage. Learn all it takes to document a loan in Kenya.