New credit scoring model offers lifeline for Kenya’s invisible borrowers

Kenya's financial landscape is on the brink of a significant transformation with the introduction of a new credit-specific scoring model that aims to enhance credit access for over five million borrowers who have been sidelined in the credit ecosystem. The CEO of TransUnion Kenya, Morris Maina, shed light on the current credit market in Kenya during a recent interview with CNBC Africa. Maina highlighted that while Kenya has made considerable progress in digital financial inclusion, there are still gaps that need to be addressed. Approximately five million Kenyans are considered underserved in the credit market, with an additional 10% of the adult population being formally unserved. This presents an opportunity for the financial sector to improve credit accessibility and drive economic growth through innovative solutions. The new credit scoring model unveiled by TransUnion Kenya in collaboration with FICO, a global credit scoring leader, aims to provide lenders with a more comprehensive view of borrowers. By analyzing up to 145 variables or data points over a 24-month period, lenders can make more informed decisions, leading to increased approval rates and credit access. Maina emphasized that the scoring model caters to a wide range of lending products, from microloans to larger credit facilities, enabling more individuals to participate in the credit market. As interest rates in Kenya begin to decline, there is optimism that affordable credit will stimulate borrowing and boost economic activity. Maina expressed confidence that the new scoring model will play a crucial role in accelerating credit inclusion and empowering more Kenyans to access financial services. The potential impact of the scoring model is significant, with Maina citing a 20 to 30 percent increase in approval rates observed in other markets where similar solutions have been implemented. Overall, the shift towards a more advanced credit scoring model signals a positive trajectory for Kenya's credit landscape, with the potential to drive greater financial inclusion and economic prosperity.