afdb-emrc sme forum - steven kamau final
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CRB Successes In Africa
7th June 2011
Steven KamauGroup Business Development
Manager, CRBAfrica
CRBAfrica Group
HQ Nairobi, Kenya
CRBAfrica Bureaus
Credit Reference Services
Collection Africa
Debt Management Outsourcing
Regional Data Services
Technology
Services
One Stop Shop
Pioneering credit referencing bureau in sub-Saharan Africa
Set up over 13 years ago in Kenya
Worked in many sub-Saharan countries to promote adoption of credit information sharing
Credit Bureau establishment in African Countries (Kenya, Rwanda, Zambia, Malawi, Botswana)
Extensive local expertise and experience in CRB software development and project implementation
www.crbafrica.com
7th June 2011
Steven KamauGroup Business Development
Manager CRBAfrica
Need for credit information sharing
Status in sub-Saharan Africa
Implementation issues
Country Case study
Lessons learnt
7th June 2011
Steven KamauGroup Business Development
Manager, CRBAfrica
Broader and Fairer Access to Credit• Decrease information asymmetries between borrowers and lenders, expand access to
credit, more equitable allocation of capital
Better performing loans• Allow lenders to accurately evaluate risks and improve portfolio quality
Prevent over indebtedness• Allow lenders to assess an applicant’s total indebtedness and thereby
calculate a borrowers capacity to service debt (with ‘positive data’)
Reduce costs to serve• Lower lenders’ operational costs in retail & SME lending, improve their margins, capital
adequacy, and provisioning requirements, leading to…
Lower cost of borrowing• and…
Improved systemic risk monitoring• Stability in the financial sector & the economy
7th June 2011
Steven KamauGroup Business Development
Manager, CRBAfrica
7th June 2011
Steven KamauGroup Business Development Manager,
CRBAfrica
Most advanced environment in South Africa
Move towards enabling environment in the last 5 years in most countries
Passage of legislative instruments mainly for the banking and financial sector
Licensing and operating regime for CRBs facilitating establishment by private sector
Credit Bureau scores the missing link- A challenge
Restrictive legal environment for CRB operations:◦ Negative data only◦ Exclusion of other economic sectors◦ Regulator rather than market driven
Data quality:◦ Non uniform Identification criteria◦ Gaps in electronic data at reporting institutions
Relative size of credit markets:◦ Financial sustainability of CRBs in some economies◦ Escalates cost of service to the market ◦ Necessitates hub and spoke CRB infrastructure model to minimize
cost to the end user for small economies
Market awareness on CRB:◦ Low user and customer awareness on value and impact◦ Necessitates extensive public awareness
7th June 2011
Steven KamauGroup Business Development
Manager, CRBAfrica
Background
Legal environment
Project implementation
Lessons learnt
7th June 2011
Steven KamauGroup Business Development Manager,
CRBAfrica
Efforts began in 1998 as a private sector initiative
Not until 2002 when 1st amendments in Banking Act to allow information sharing
Subsequent amendments from 2006 mandating sharing of NPLs
Enacting regulations gazetted in 2008, providing for the licensing of CRBs
2009 CRB licensing commenced culminating with a licensee in 2010 (CRBAfrica)
CRB law currently anchored under the Banking Act:◦ Only institutions licensed under the Banking Act can share
◦ Only negative data is mandated; positive is voluntary
◦ Information sharing permitted for MFIs / SACCOS but under separate acts (fragmented legal environment)
7th June 2011
Steven KamauGroup Business Development
Manager
Implementation largely driven through a bankers association project initiative
Arising issues centrally dealt with under full consultations across market players
Regulator providing direction and compliance oversight Systematic and coordinated public awareness
Legal environment requires substantive review to allow full file and cross-sector information sharing (only way aforesaid benefits of information sharing can be realized).
7th June 2011Steven Kamau
Group Business Development Manager
Risk Classification of Loans (CBK Supervision Report 2009)
◦ 92% Performing
◦ 8% Non-performing
7th June 2011
Steven KamauGroup Business Development Manager
CRBAfrica
Limited Credit Information available based on NPL data only
No benefit for a customer with a good repayment record
Penalizes customers who may have had past NPL but are
currently performing
7th June 2011
Steven KamauGroup Business Development
Manager, CRBAfrica
39.8
74.8
Negative
information
only
Negative and
positive
information
Percent of Applicants who Obtain a Loan
(Barron and Staten (2000). Note: Figure shows the simulated credit availability assuming a target default rate of 3%)
90% increase
in access
Negative Only
Negative + Positive
39.8%
74.8%
¨Out of every 100,000 loan
applications 11,400 are lost if
assessment is based on negative info
only¨
Consumer default rates would drop from 8.6% to 4.7%
Positive credit data may increase credit access by 19%
Implementation of positive data would highly decrease the levels that today are rejected by the financial system◦ Those benefitting the most would be those in the Micro to Medium size
Postpaid mobile phone sector would grow more than 100% with the introduction of Positive Credit Data
13
Source: Serasa Experian Positive Information Record study Oct 2009, Serasa Experian Special Study – 2010, Positive Credit Record Serasa Experian 2009
Legal environment (from the outset):◦ Envisage comprehensive reporting – positive and negative◦ Allow cross-sector information sharing◦ Preferably stand-alone act under the Central Bank◦ Mandate information sharing and access?!
Capacity building:◦ Regulator:
CRB licensing, supervision and compliance
Use of CRB Data for enhancing supervision and general trends◦ Users:
value of CRB data in credit process
technical assistance on data quality and reporting: e.g. unique Identification Numbers
Consumer awareness:◦ Inform and educate the consumer on need for sharing their data◦ Consumer rights under CRB law and operations – right of access, right to dispute,
right to have corrected, etc
Continuous regulatory oversight of all players necessary to ensure smooth implementation and application!
7th June 2011
Steven KamauGroup Business Development
Manager, CRBAfrica
Thank You!