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AfDB-EMRC SME Forum - Steven Kamau Final

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AfDB-EMRC SME Forum - Steven Kamau Final

  1. 1. CRB Successes In Africa Steven Kamau Group Business Development Manager, CRBAfrica 7th June 2011
  2. 2. CRBAfrica Group HQ Nairobi, Kenya CRBAfrica Collection Regional Data Bureaus Africa ServicesCredit Reference Debt Management Technology Services Outsourcing Services One Stop Shop
  3. 3.  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 Steven Kamau Group Business Development Manager CRBAfrica 7th June 2011
  4. 4.  Need for credit information sharing Status in sub-Saharan Africa Implementation issues Country Case study Lessons learnt Steven Kamau Group Business Development Manager, CRBAfrica 7th June 2011
  5. 5.  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 Steven Kamau Group Business Development Manager, CRBAfrica 7th June 2011
  6. 6.  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 Steven Kamau Group Business Development Manager, CRBAfrica 7th June 2011
  7. 7.  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 Steven Kamau Group Business Development Manager, CRBAfrica 7th June 2011
  8. 8.  Background Legal environment Project implementation Lessons learnt Steven Kamau Group Business Development Manager, CRBAfrica 7th June 2011
  9. 9.  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) Steven Kamau Group Business Development Manager 7th June 2011
  10. 10.  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). Steven Kamau Group Business Development 7th June 2011 Manager
  11. 11.  Risk Classification of Loans (CBK Supervision Report 2009) ◦ 92% Performing ◦ 8% Non-performing 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 Steven Kamau Group Business Development Manager 7th June 2011 CRBAfrica
  12. 12. Percent of Applicants who Obtain a Loan 74.8 74.8% ¨Out of every 100,000 loan 90% increase applications 11,400 are lost if in access assessment is based on negative info 39.8 only¨ 39.8% Negative Negative Negative Negative and Only + Positive information positive only information(Barron and Staten (2000). Note: Figure shows the simulated credit availability assuming a target default rate of 3%) Steven Kamau Group Business Development Manager, CRBAfrica 7th June 2011
  13. 13.  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 DataSource: Serasa Experian Positive Information Record study Oct 2009, Serasa Experian Special Study – 2010, Positive Credit Record Serasa Experian 2009 13
  14. 14.  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! Steven Kamau Group Business Development Manager , CRBAfrica 7th June 2011
  15. 15. Thank You!

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