Non- performing loans: Are credit reference bureaus the solution?

Abstract

The post independence period in Kenya was one of tremendous economic growth characterized by conscious Government policy to transfer economic activity into the hands of indigenous Kenyans and the banking sector was no exception I. Twenty years after independence in 1983, several indigenous banks developed acute liquidity problems. In spite of Treasury and Central Bank efforts to bailout the ailing institutions, one institution was closed in December 1984. This bank failure exposed the inadequacy of safety- net and failure resolution mechanisms existing at the time. This in effect, precipitated amendments to the Banking Aet in 1985 to expand the safety-net and improve the bank failure resolution mechanism.' However, in the ensuing period two more institutions collapsed in August 1986 followed by a third one in January 1987 and these institutions were placed under liquidation by the Official Receiver, a Government office under the Attorney General's Chambers.