Consumer and Housing Loans/Financing Review

The Central Bank of Kuwait has mandated all financial institutions offering consumer and housing loans/financing to individuals in the State of Kuwait — including banks, investment companies, and financing companies — to appoint an independent auditor to perform a periodic review of their loan and financing portfolios. The purpose of this review is to ensure that such institutions fully comply with the Central Bank of Kuwait’s regulatory instructions, maintain credit quality, and uphold transparency in the process of extending financing facilities.

What is the Central Bank of Kuwait’s regulatory framework for granting consumer and housing loans/financing?

The Central Bank of Kuwait issued Circular No. (2/BS, IS, FS/413/2018) dated 11 November 2018, addressed to banks, investment companies, and financing companies, which sets out the rules and regulations for granting personal loans for consumer and housing purposes and issuing credit cards, in addition to the subsequent amending circulars, including:

• Circular No. (2/BS, IBS, IS, IIS, FS, IFS/476/2021) issued to all Local Banks, Investment Companies, and Financing Companies regarding the Conditions and Controls for Implementing Article (2) of the Law No. 3 of 2021 for the Deferral of Financial Obligations for Six Months.
• Circular No. (2/BS, IBS, FS, IFS, IS, IIS/519/2023) issued to all local banks, investment companies, and financing companies introducing new amendments to the instructions issued on 11/11/2018 regarding the rules and regulations for granting personal loans for consumer and housing purposes, and issuing credit cards.
• Circular No. (2/BS, IBS, FS, IFS, IS, IIS/586/2025) issued to all local banks, investment companies, and financing companies adding a paragraph to Clause Two, Item (A), of Chapter Two: Amendment of Loan/Financing and Monthly Installment of the instructions issued on 11/11/2018, amended by the instructions issued on 28/05/2023, regarding the rules and regulations for granting personal loans for consumer and housing purposes and issuing credit cards.

These circulars together form the regulatory and supervisory framework governing personal lending and financing policies for individuals in Kuwait and precisely define the obligations of financial institutions with respect to compliance, reporting, and transparency.

Is it mandatory for financial institutions to appoint an audit firm to review the loans and financing portfolios?

The Central Bank of Kuwait issued a circular dated 7 August 2013 requiring banks, investment companies, and financing companies to engage an audit firm to conduct a comprehensive and ongoing review of all consumer and housing loans/financing cases on a quarterly basis. Such a review shall be conducted in accordance with the terms of reference attached to Circular No. (2/BS/IBS/IS/IIS/FS/IFS/367/2016) dated 18 October 2016, along with the Instructions dated 20 November 2018 and the Circular issued on 28 July 2025.

The objective of this requirement is to ensure independent periodic review of loan portfolios, strengthen confidence in the accuracy of loan data, and confirm full compliance with applicable credit regulations.

What is the deadline for submitting the audit report on consumer and housing loans/financing portfolios to the Central Bank of Kuwait?

According to Circular No. (2/105/1561) dated 14 February 2018, issued by the Central Bank of Kuwait, the audit firm’s report on the review findings must be submitted within 45 days from the end of the period under review.

What are the conditions for engaging an audit firm?

1. The newly engaged audit firm must not be among the current external auditors of the bank/company, nor the auditors assigned to conduct the Internal Control Review (ICR).
2. The audit firm conducting the review must be rotated every two years.

What regulations and international standards does the independent auditor apply in preparing the review report?

1. Instructions and Circulars issued by the Central Bank of Kuwait.
2. International Standards on Auditing (ISA).

What is the added value to financial institutions from the Loans and Financing Review?

1. Ensuring compliance with laws, regulations, and circulars issued by the Central Bank of Kuwait.
2. Enhancing stakeholder confidence — including regulators, shareholders, and customers — in the accuracy and reliability of financial reports.
3. Improving credit management efficiency and supporting better-informed credit decisions.
4. Reducing credit risk exposure by analyzing portfolio quality and identifying weaknesses in credit policies.
5. Strengthening governance, transparency, and the institution’s professional reputation.

What are the services provided by Baker Tilly Kuwait?

Preparation of a Quarterly Agreed-Upon Procedures Report on the review findings of consumer and housing loans/financing portfolios.

Why Baker Tilly Kuwait?

1. Baker Tilly Kuwait is registered with the Central Bank of Kuwait.
2. Extensive technical expertise, competence, and specialization in the banking and financial sector.
3. Strong professional reputation and independence.
4. Strict compliance with the Central Bank of Kuwait’s instructions and the International Standards on Auditing (ISA).
5. Timely execution and effective coordination with regulatory authorities.