Credit Bureau Program
Credit bureaus play an important role helping consumers and small businesses obtain financing.
The credit information on individuals or small business borrowers they provide to lenders helps remove uncertainty that has traditionally been associated with lending. Accurate and timely credit information also allows financial institutions reduce risks, loan processing times, costs, and default rates.
For borrowers, detailed credit information and a modern credit reporting system often lead to lower interest rates, making loans more affordable and more available. Credit bureaus also support responsible lending practices, and help borrowers avoid over-indebtedness. These benefits all combine to support broad economic growth.
Advanced credit reporting systems make a major contribution to increasing access to finance, which is fundamental to the growth of small and medium enterprises (SMEs). A lack of access to finance is often cited as one of the major obstacles hindering economic growth in sub Saharan Africa.
How is IFC Supporting the Growth of Credit Bureaus?
IFC’s Africa Credit Bureau Program is providing advisory services to central banks, national bankers associations, and other private sector stakeholders in six countries, with plans to expand to 15 by 2014. IFC’s specific interventions in credit reporting include, but are not limited to:
Advisory support to help develop and implement credit information sharing systems (private credit bureaus, public credit registries or mixed credit credit-reporting models), with an emphasis on microfinance institutions and small and medium enterprise credit reporting;
Advisory support to governments to develop the appropriate legal and/ or regulatory framework for credit information sharing (at times in collaboration with the World Bank);
Public and private sector education campaigns on the benefits of credit information sharing;
Support for the development of value-added services in markets with more mature credit information sharing systems.
The Program is helping the Bank of Ghana and private sector stakeholders improve credit information sharing in Ghana. Under an agreement with the Bank of Ghana, IFC provides capacity building to stakeholders to develop the private credit bureau market model that Ghana adopted for credit information sharing. Among other activities, IFC conducts credit reporting workshops for lenders to foster an appreciation and understanding of credit bureau data for risk management.
The Program is working with the Central Bank of Tanzania to establish a legislative regime and a central bank managed data bank (‘public credit registry’). It is also helping the Tanzania Bankers Association and other lenders establish a private sector credit reporting system in Tanzania; encourage lenders to participate in a credit reporting system; and educate lenders and consumers about the benefits of credit bureaus.
The Program has provided advisory support to the National Bank of Ethiopia to upgrade their existing Credit Information Center into a state-of-the-art facility. The Program will also review the legislative framework around credit information sharing, and support awareness and sensitization campaigns for all stakeholders. A major goal is to build the National Bank of Ethiopia’s capacity to implement and operate the Credit Information Centre initiative.
The Program provides advisory support to stakeholders in Kenya who are developing a strategy for credit information sharing. IFC is talking with stakeholders about a full advisory services program for Kenya, whose credit reporting system is currently hampered by a challenging and complicated legal framework.
|SIERRA LEONE AND LIBERIA |
IFC’s Credit Bureau Program (in partnership with IFC’s Conflict Affected States in Africa Program) is in talks with the central banks of Sierra Leona and Liberia on designing possible strategies for credit information sharing for these countries, which face particular credit reporting challenges due to their small markets.