Any person with a conservative perspective of CIS Kenya’s mandate would be forgiven for asking the question: How does CIS Kenya harmonize its traditional role of developing a credit information sharing system with its new leadership role of promoting Sustainable Finance among non-banking institutions in Kenya? The answer lies in the recognition that our membership requires a more comprehensive view of the risks that confront them.
There is no doubt that information asymmetry threatens the quality of the loan book. The solutions that credit bureaus offer by providing credit bureau reports, scores and other products are largely used to mitigate the economic risks of the business. However, it has become increasingly clear that our membership must consider the long term effects of the depletion of natural resources and climate change. We set out to complement our CIS value proposition with a conversation on the urgent need for our members to engage with the sustainability issues that call for balancing environmental, social and economic factors of their business.
We identified World Wide Fund for Nature Kenya (WWF) as a partner in this journey. We settled on the local Development Finance Institutions operating in Kenya as our first sector of focus and who quite fortunately, are part of the CIS Kenya membership. This WWF-CIS Kenya partnership is intended to encourage non-bank financial institutions to re-examine indirect and direct risks that arise from environmental and social (E&S) issues
We are of the view that time has come for member institutions to draw from the opportunities that arise from sounder loan portfolio thanks to adequate E&S risk identification and management. Working with a committee that was established from among local DFIs, we have defined the sustainability agenda for this category of members drawn from the convergence that exists between AADFI Standards, CIS best practices and Sustainability factors. Having mapped out the common areas of concern, we proceeded to develop a Self-Diagnostic Tool (SDT) that will help our members undertake a self-assessment of the gaps that exist in their risk management frameworks. The next step will be to develop a Customer Assessment Tool (CAT) on Sustainable Finance Compliance.