A Publication of Credit Information Sharing Association of Kenya (CIS KENYA)

marry meCREDIT PROVIDERS

April - May 2016 Edition

Consumer FocusEdition

TATUA CENTER

PLUS

Mine field to marriage: Credit Information Sharing Alternative Dispute Resolution

Co-Ownership ofMobile Money Data:

Building a Kenyan creditbureau for the digital age

CIS KENYA Radio Diaries

A Publication of Credit Information Sharing Association of Kenya (CIS KENYA)

marry meCREDIT PROVIDERS

April - May 2016 Edition

Consumer FocusEdition

TATUA CENTER

PLUS

Mine field to marriage: Credit Information Sharing Alternative Dispute Resolution

Co-Ownership ofMobile Money Data:

Building a Kenyan creditbureau for the digital age

CIS KENYA Radio Diaries

CIS Kenya | Digest1

Relationships are made of agreements, that create expectations which are often met but unfortunately sometimes are not fulfilled. Such is the case of credit contracts that credit

providers enter into with the credit consumer.

For sure, Credit Information Sharing came about

as a result of efforts towards mitigating credit risk.

Credit providers wanted to shield themselves

from encountering numerous repayment

dishonours. Since the consumers knowledge of

the mechanism, the level of accountability has

risen radically and lenders are now more confident

to do business.

However, we cannot miss occasional mishaps

in our industry. Any data handler always gives

a margin of error no matter how accurate they

are. Since millions of credit lines from numerous

sources are recorded at the CRBs each month, it

is almost guaranteed that there shall be affected

Word from the Editor

parties with erroneous/outdated/incomplete

data. The CIS industry may then look like a mini-

minefield, especially if there is no corrective

measure towards resolving this errors.

Hence Tatua Center, the Credit Information

Sharing Alternative Dispute Resolution Center.

read on how the credit industry should embrace

Alternative dispute resolution. Also visit their

website www.tatuacenter.co.ke

Also see a consumer protection article from our

guest write Rafe of CGAP and lastly, an account of

our Swahili Radio campaign.

Write back to us on info@ciskenya.co.ke we

would love to hear from you.

Communications desk

CIS Kenya | Digest2

Tatua Center, the Alternative Dispute Resolution Center for the Credit Information Sharing Industry: the banks, some microfinance banks, CRBs and now even mobile lenders and innovators was established pursuant to the CRB regulations 2014 and has been operational for past one and half years.

Having received well over 500 complaints 91% of which have been resolved at intervention and facilitation stages and the other 9% resolved amicably through mediation, never has a case from Tatua center escalated to court. Last year, 4 cases were withdrawn from court after settlement at Tatua center. If one wonders what the magic for this center is, the best answer would be Mediation.

Mediation provides an efficient and credible dispute resolution mechanism far from the commonly preferred resolution platforms of arbitration and litigation. Mediation ensures that relationships of the disputing parties are maintained. It is often preferred for its relatively low cost advantage.

Manie Van Schalkwyk, former Credit Ombudsman South Africa, carried out a peer review of the

Mine field to marriage: Credit Information Sharing Alternative Dispute Resolution

Tatua Center since the one year pilot phase was coming to an end. It was prudent to assess so as to strategize on its future which shall be shaped by market dynamics and international benchmarking standards: World Bank1 and the International Network for Financial Services

Ombudsman Schemes.

The emerging pertinent issues from the review were: embracing an independent ADR

1 Worldbank Report 2012 Fundamentals of Financial Ombudsman

91%

9%

resolved amicably through mediation

resolved at intervention

and facilitation stages

Over complaintsreceived to date at TATUA CENTER

500

By Everlyne Silong Oloishorua

CIS Kenya | Digest 3

mechanism, creating an office of the Ombud and expanding the mandate to be broader than addressing CIS disputes only.

According to Manie, the ADR process is unlike other professional relationships where official mannerisms are observed. Here it in necessary to break the glass wall of formality. Much like a marriage. The credit industry is akin a lady being wooed and the ADR process a suitor. If you are looking for a partner, you are looking for a pleasant, cheap, flexible and swift partner. Mediation is like so. The hallmarks of mediation are: pleasant conversation aimed at keeping/restoring the relationship and flexibility to arrange convenient terms for all the parties and where apologies and forgiveness are dispensed generously.

In South Africa, Office of Ombud is enshrined in the law as a dispute resolution mechanism for the broader credit industry. It receives government financing and thus obtains govt. buy-in and support. It gains recognition and respect from industry because of its state position. The Ombud receives a wider range of disputes and his decision is respected since they are powerful in terms of jurisdiction and opinion.

The non-Ombud structure like the one in Kenya, is enshrined in law under the CRB regulations 2014. A non-litigation dispute resolution mechanism is what the credit industry in conjunction with the Kenyan Judiciary endorsed and hence the Tatua Center being established.

Currently Tatua Center resolves only CIS related disputes as stipulated in the Regulations aforementioned. There have been hundreds of complaints received at the Center, 91% were resolved amicably at the intervention and facilitation stage where correspondence did not involve a mediator. It involved redirecting of clients, clarification of information on the law or process and such like activity. Often the complaints were not CIS related and thus necessitated dismissal. This demonstrates a need to expand the mandate of the center.

Thanks to its success, the Tatua Center is becoming a darling of the court and further enjoys support from the financial service providers. We look forward to a day it shall be popular with the consumer of credit as well.

the ADR process is unlike other professional relationships where official mannerisms are observed.

4

2014

cases were withdrawn from court after settlement at Tatua center.

The year Tatua Center, the Alternative Dispute Resolution Center for the CIS Industry was established pursuant to the CRB regulations

CIS Kenya | Digest4

Who owns the data generated by mobile money customers transactions?

In January, 2016, Safaricom announced a new way for consumers to access statements for their mobile money accounts. With a simple enrollment via short code, you can now receive

a detailed statement of all your M-Pesa activity each month or request a statement for the past 6 months.

The benefits to customers of this new feature extend beyond its ease of use when compared to the Self-Care option at Safaricom.co.ke. Betty

Co-Ownership of Mobile Money Data: Building a Kenyan credit bureau for the digital age

Mwangi, Director Financial Services, Safaricom, described what is driving demand for this new service:

Every month an average of 30,000 customers visit our Retail Centres specifically seeking to receive printed M-PESA statements, as a prerequisite to

accessing credit from financial institutions or for business reconciliation purposes.

This observation has far-ranging implications and hints at a possible shift in how we view consumers ownership and control of their mobile money data, assuring that any and all innovations include robust and clear data security practices, since protecting data security is the most essential element of any data sharing arrangement.

Mobile money data has become an integral part of many new alternative scoring models and related lending services entering the Kenyan market (our latest count suggests there are more than 10 new digital lenders in Kenya). This fast-growing trend in turn opens up the possibility of consumers using their mobile money data to receive more credit

Rafe Mazer and Kate McKee, CGAP Read (https://www.cgap.org) for CIS Kenya

CIS Kenya | Digest 5

provider control over consumers own financial data, to a more open, shared approach where consumers have some control over their data and how they and providers can use this data to offer them new products and services.

Moving from a proprietary to a co-ownership model for mobile money data where customers have

more rights over who sees their data, which data and when -- holds great potential to benefit Kenyan c o n s u m e r s and unleash innovations in digital finance. Next generation credit bureaus built on this model could result in better-balanced value between mobile money customers, their providers, and third parties. For example, as millions of Kenyans now make utility and other regular payments via

mobile money paybill functions, a more inclusive credit bureau could enable the strong payers among them to seek out and qualify for more and better offers, while at the same time strengthening risk management for the lenders currently in the market.

This model could also help drive competition and lower barriers to entry, as new lenders, insurers and other service providers would be able to harness

offers and to leverage prior strong loan repayment for better pricing or terms on subsequent loans.

Is it now both timely and feasible to re-think the ownership concept for mobile money data and enable a co-ownership model, where consumers could leverage their own data to qualify for more attractive offers? This could offer an alternative to the

current practice of complicated and often one-sided data usage agreements that consumers must sign as a condition of service but rarely read or understand. Typical service agreements give providers almost unrestricted rights to sell customers mobile money data to third partieswho then often use it to market unsolicited credit offerswhile creating barriers for a customer to share data with a provider of their choice. There needs to be a shift from this practice of full

CIS Kenya | Digest6

this transactional data to manage risk and reach more consumers at lower cost.

Before we open the gates to a co-ownership model, however, several important principles should be put in place through a consultative process that balances interests of the various parties. We propose four principles to start the discussion.

Principle 1: Consent and usage restrictions

Most terms and conditions in the digital world seem to allow for wide sweeping rights of providers to share consumers data with whom they want. Many times consumers are not fully aware that this data has been sold or otherwise provided to another party, nor are they likely to have a say in whether and how the party receiving the data can then target them with direct marketing. A more pro-consumer approach would require that any sharing of mobile money data be on a per-transaction basis, limiting the use of that data to the transaction specified by the consumer. This will ensure that consumers know each time their data is being used, directly consent to that usage, and are not at risk of their data being shared and used for purposes they do not consent to. It is also important to test and develop good practices for how to communicate data usage and consent in a clear and meaningful way to consumers. CGAP research in Tanzania showed that it was possible to get across basic principles of data sharing and restricted usage via SMS, but that for many consumers it is important to have a channel to receive further information on their data rights and usage rules if they have further questions.

Principle 2: Easy processes for consumers to safely share their own data

One clear lesson from the challenging path towards mobile number portability in Kenya is that the process needs to be easy, fast, and as automated as possible. If each service provider has its own

operational procedures, this will hinder consumers ability to port their mobile money data to others. Once the consumer requests that the data be shared with another provider there would be a simple function built in to each mobile money service (including third parties as well as MNOs and banks) that could transfer consumers transactional data in a standardized format. In the United Kingdom this process has already been put in place in the banking industry, where banks are required to allow consumers to share their banking information with other providers; while in Chile Destacame (www.destacame.cl) is a start-up that helps consumers leverage their utility payments to receive a credit score that they can then share as they see fit with lenders and other providers.

There are several different ways to design this process, ranging from bilateral technical integrations to a centralized third-party that stores and disseminates this information on behalf of consumers. One benefit of a centralized hub would be the potential for a single set of standardized sharing and usage agreements and related terms and conditions; limiting the risk of providers imposing terms that compromise consumer privacy, limit informed consent, or lead to unsolicited data sharing and marketing. This would also limit the potential data privacy risks that arise when third-parties develop hacks or workarounds to access restricted information.

In the United States some third-party lenders have consumers provide their account log-in details, which they then use to gather their financial data, opening consumers up to serious data privacy and data theft risks because they could not easily share their financial data otherwise.

Principle 3: Rules for marketing of credit offers

In markets with robust and well-functioning credit bureaus, one of the risks of consumers histories being easily accessible is that increased information

7CIS Kenya | Digest

can lead to aggressive marketing of credit offers. This can lead to consumers borrowing in excessive amounts or without specific needssuccumbing to human biases such as temptation and hyperbolic discounting. Therefore any expansion of the data shared would need to be matched with provider standards and rules of conduct on marketing. For example, a good practice would be to require consumers to specifically opt in to receive product offers and marketing materials for a product or service offered by a provider or their partners.

This would assure that consumers only receive the information they want to receive and not allow for unauthorized selling of their data to others who then provide unsolicited credit offers via mobile and data channels. An important area of further research is whether consumers can fully understand and benefit from agreements where they allow for ongoing marketing and communications. If this cannot be designed in a way that is easily understood and simple for consumers to revoke, then it would indicate the need for restricting marketing to a one-off basis and only when directly requested by the consumer.

Principle 4: Developing clear lines on what types of data can be shared versus kept private

We believe that opening up avenues for consumers to share and benefit from their mobile money histories is an important goal for Kenya. This does not mean that we favor forcing incumbent providers to relinquish completely all rights to data on their customer base.

First, there should be certain benefits awarded to those who have built and continue to serve a loyal customer base. This includes leveraging their customers data beyond mobile moneye.g. demographic, voice, SMSand strong customer relationship to engage with their consumers within their own network. Second, there is the risk that sharing all consumer data would create privacy risks for consumers if, for example, their voice and data usage was also shared for credit scoring. In fact, one third-party lender in Kenya already reviews the contents of consumers SMS, call logs, and contacts as part of their scoring model. Interviews with consumers by CGAP and the Omidyar Network have made clear that consumers do not always feel comfortable sharing such personal details to help achieve financial access.

To determine what data could be shared and what data it is in customers best interests to restrict from sharing, it is important that a diverse set of industry actors, CIS, credit bureaus, relevant regulators and data privacy experts have an open discussion and determine where the line can be drawn to enable increased control over financial information in a responsible and competitively fair manner.

There may be some challenging issues and heated debates along the way, but as the global leader in mobile money and digital credit, the time is right in Kenya for a new vision of co-ownership of financial data in Kenya. As the recent expansion of digital lending has shown, there are millions of consumers in Kenya seeking better access to financial products, and a growing number of innovative providers wishing to serve these consumers. All that is missing is a new set of standards and a centralized platform to responsibly connect consumers data with a wider range of providers in a responsible, transparent and secure manner.

CIS Kenya | Digest8

CIS KENYA RADIO DIARIES Oct - Dec 2015

The concept

In September 2015 CIS Kenya contracted Radio Africa Group to carry out Phase one of a radio consumer education campaign on Radio Jambo through 40 sec spot ads targeting the Swahili audience. The objective of the campaign which ran between October and Dec 2015 was to generate consumer awarenss on credit informations sharing and how it impacts them.

We were privileged to work with Leonard Mambo Mbotela, reknown radio journalist and respected voice of the famed flagship brand jee hii ni uungwana? The choice for Leornard was informed by what we considered a strategic need to use a known voice to articulate an unknown subject: Credit Information Sharing. Using 3 audio clips which aired each month in succession of each other, whose message built up on the theme knowing your credit information and if you have a dispute, we are here, we encouraged the listeners to call in to get information on the subject.

The experience

Our telephone during this period was the device earning its return on investment. Kenyans A typical day would begin with looking through our call log. Then the phone would ring not graciously but a whole lot. My colleagues; God bless them had

their office turned to a call center and anytime the phone would ring, the conversation at hand or the focused silence was interrupted to address our client.

In all truth, neither the caller nor our team did not know what to anticipate. Here we are in an age that has abundant credit products branded and

marketed to one audience who have the follow through financial and legal jargon to understand the various terms and conditions. We are not customer care professionals, we are CIS experts. However, we want the consumer of credit to be empowered, and we have to stoop down to their level of understanding, speak their language and use their phrases to get the message across. On two occasions, the caller couldnt engage in any official Kenyan languages, we had to find someone to speak in a vernacular tongue!! Most often we had to speak in Swahili and translate CIS and credit terms to an equivalent in Swahili. We have grown fond of our callers and if the phone does not ring as much as we anticipate, we feel something is amiss.

By Everlyne Silong Oloishorua

9CIS Kenya | Digest

1. Please check if I have been listed/ is my name in the CRB?2. How can I get my credit report3. How do I get a clearance certificate?4. What is my CRB status?5. What if Ive not taken a loan, what is my CRB status?6. How do I make my score go higher?7. How do I know who has listed me?8. What is inside a credit report?9. I have not defaulted, why am I listed?10. What are the consequences of defaulting?11. I defaulted but Im now ready to come out of CRB what do I do?12. How do I correct wrong information at the CRB?13. I was listed erroneously and Im now being requested to pay for

clearance certificate. Why should it be me paying for that cost? 14. I was sacked and couldnt repay my loan. I had a local

arrangement with my former colleague/guarantor for him to repay for me and he has since cleared. Why am I still listed?

15. I guaranteed someone and they defaulted. Why am I being listed?

16. We borrowed a loan as a group and all defaulted. If I pay my share, will I be de-listed?

17. I applied for a loan that was to be repaid through check-off on salary. My employer delayed to remit the funds and I was listed. Kindly assist me?

18. I got an accident and was hospitalized for three months, I didnt default willingly, kindly assist me.

19. We took a group loan and one of us died, kindly advice what to do?

20. I downloaded my report but the details arent mine. Kindly advice?

21. Can I be delisted before 5 years?22. I have paid my loan, why arent the records being updated?

Mobile Phone Loan Related Questions

1. Why was I denied a mobile loan?2. I defaulted but have since paid, please clear my name/

why dont they give me loan anymore?3. I lost my phone line which had a mobile loan, how do I

get it to repay?4. Someone used my line to get m-shwari, they defaulted.

How do I prove that? What do I do?5. I borrowed very little money. Why does that make me

listed?6. Ive borrowed a mobile loan and I likely not to pay it back

since Im broke, what do I do so I dont get listed?

Other Questions

1. I defaulted because I could not understand their message, help me?

2. What is my loan balance?3. How exactly do you help me?

Summary of Questions arising as quoted from callers CRB related Questions

StatisticsNumber of Callers CRB listing Mshwari KCB Mpesa AFB Other issue issue issue issue

538 100 80 18 8 332

Cont. from page 8

CIS Kenya | Digest10

FEEDBACK

All in all, this is what we understood of our callers please see their questions in the box) at the content above :1. Our listeners generally had difficulty with details of the loan

contract. They are very willing to avoid consequences if only these consequences are obvious at the point of application. They expect pardon and relief for this ignorance.

2. Some of the callers who are negatively listed want money and they want it now but since they cannot access it as they apply they are convinced the CRB is a financial jail

3. The few who have substantive disputes did not know there was Tatua center an excellent alternative to court .

Common antagonists as mentioned by the caller were: CRB, Mshwari, KCB Mpesa, AFB card, KREP, Faulu, HELB , Jamii Bora, , Equity, M-Pawa. The most known CRB is Metropol followed by TransUnion and finally Creditinfo. This is due to Metropols national network of agents and TransUnions age in the industry.

Parting shot

A big challenge to the corporates who sell credit products is: phrase credit terms and conditions in a customer focused manner. An innovative suggestion for mobile based lenders would be the use of Automated voice response reading out these conditions instead of an online page hosting the information. Keeping in mind that most Kenyans dont read much or go online, this would help them understand the product better and reduce the lethargy for CRB related information but most importantly reduce default rates in the credit market.

We are airing the 2nd edition of the campaign in Classic 105. We cant wait to analyse their response and share that with you! CGAP are also partnering with us on coming up with a more advanced and personalized outreach channel that catalyzes dispute resolution. May the day break.

Cont. from page 9

11CIS Kenya | Digest

Exhibitor PictorialsCRB expo Feb 23rd - 27th 2016 , KICC, NBI Kenya

Located at the Kenya School of Monetary Studies Mathare North Road, o Thika Road