Credit Information Sharing (CIS)


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Nairobi, 14th July, 2014. Presentation by Jared Getenga (Association of Kenya Credit Providers (AKCP)) at the "Plug and Play" day, Fin4Ag conference.

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Credit Information Sharing (CIS)

  1. 1. Creditinfo A proven world class Credit Bureau operator Shane Moldenhauer Head of Business Development – East Africa July 2014, Nairobi.
  2. 2. Question How many of you know what a Credit Bureau is and what it does? How many of you think a Credit Bureau can benefit you and your business in a positive way?
  3. 3. Agenda • Introduction to Creditinfo • Credit Bureau explained • Creditinfo’s Credit Bureau Solution
  4. 4. Let’s have a conversation Not a broadcast presentation
  5. 5. Agenda • Introduction to Creditinfo • Credit Bureau explained • Creditinfo’s Credit Bureau Solution
  6. 6. About Creditinfo • We provide credit information and credit risk management solutions and tools. • Creditinfo Group hf. established 1997 in Iceland • Currently operating 19 subsidiaries /affiliates in 16 countries, approx. 250 employees • Creditinfo Kenya established in 2014 • Endorsed by and have long term relationships with internationally recognized authorities & organizations • World Bank • International Financial Corporation (IFC) • Central Banks & Banking Associations in different countries
  7. 7. Starting Credit Bureau Operations from a ZeroBase • dealing with different rules and regulations, different cultures and mentalities • different data structures and data quality, different IT infrastructures • different data protection/credit bureau laws
  8. 8. Agenda • Introduction to Creditinfo • Credit Bureau explained • Creditinfo’s Credit Bureau Solution
  9. 9. A common problem Finance is a barrier to growth for many businesses worldwide.
  10. 10. What is the issue? • Lenders need to have reliable information to make lending decisions • Consumers and businesses need to be able to give evidence to the lenders to prove their reliability • Regulators need to be able to monitor risk with lenders and within the marketplace
  11. 11. The Solution A Credit Bureau
  12. 12. What is a Credit Bureau? A few definitions: • Sometimes called a credit reference agency, credit information company or credit registry • A firm that maintains consumer credit data files and provides credit information to authorised users • An agency that collects individual credit information and provides it to creditors so they can make a decision on granting loans. Typical clients include banks, mortgage lenders, credit card companies and other financing organisations.
  13. 13. Credit Bureau – The Concept
  14. 14. Would you lend a stranger…? 10,000 Kenyan Shilling 100,000 KES 1,000,000 KES
  15. 15. What questions would you ask? Before YOU lend any of YOUR own money to someone…. What information would you want to know? What questions would YOU ask?
  16. 16. Let’s have a conversation Not a broadcast presentation
  17. 17. What questions would you ask? Before YOU lend any of YOUR own money to someone…. What information would you want to know? What questions would YOU ask?
  18. 18. Possible Questions • Do I know them? • Can I trust them? To do what? • Can I trust them to repay me • What terms have been agreed or do you want? • Is repayment “just whenever” possible? • Will they use the money wisely? What is wisely? • If something happens to them….. • Where do I stand? • How do you get my money back? • Am I being reimbursed for the risk?
  19. 19. A Credit Provider Asks Similar Questions We may want to frame the questions in the following manner ….. Can I use data to identify the potential customer to ensure they are who they say they are? Has the potential customer got a history of good payment performance, showing responsible attitude to credit commitments? Does the potential customer have a high current state of indebtedness,and have they historically paid the amount that they would need to in the future? Has the customer being shopping at many places for loans and potentially be declined by other lenders? Has the potential customer got a history of unpaid loans?
  20. 20. Where does a Credit Bureau get the data from? Example Sources: • Banks • Credit Card issuers • Loan agencies / Finance houses • Telecommunication companies – mobile phone, landline, internet providers, tv suppliers • Utility Companies – electricity, gas, water • Insurance companies • Debt collection agencies / Debt Purchase agencies • Public court records • Rental Agreements • Retail credit, home & online shopping - Travel, Entertainment, Department store cards • Direct from the consumer – from you!
  21. 21. Data Sharing Concept of a Credit Bureau Originators of the Data are the Credit Grantors & Official Sources MFIs, Retailers, Telcos Courts etc Simplified Credit Report Name and Address ID Number Customer Status Customer Details Bad Debt – Overdraft 65655 Default Date 04-05-09 Amount $1,000 Negative Details Loan 11122 Date – Open 17-11-09 – Closed -------- Loan Amount $1,000 Basic Positive Details Loan 34566 Opened Date 17-11-09 Loan Amount $1,000 Current Balance $ 475 Monthly Repayment $ 45 Payment History 01000032100000 Collateral - None Full Positive Details Credit Bureau consolidates and manages the information CREDIT BUREAU Banks
  22. 22. What is a Credit Score / Credit Report? It is the starting point of a pre-approval for credit. • A number generated by mathematical formulas and statistical models which helps the lender determine if you are a good risk. • The higher your score, the lower the risk you are to lenders. • Your financial CV • A snapshot of your credit risk picture at a particular point in time. • A predictor of your future payment performance based on prior experience
  23. 23. Sample Credit Report Company Details Company Summary
  24. 24. Sample Credit Report Risk Indicator
  25. 25. Sample Credit Report Court / Direct Information
  26. 26. Sample Credit Report Company Ownership • Director Involvements
  27. 27. Sample Credit Report Capital Company Involvements
  28. 28. Sample Credit Report Annual Financial Statements
  29. 29. Sample Credit Report Recent Enquiries
  30. 30. Who can see your Credit Report? • Any creditor or lender to whom you have applied for credit • A mortgage lender, when you apply for a home loan • A property management firm, when you apply to rent • A prospective or current employer on a need to know basis • An insurance company, when you apply for insurance • A mobile phone company when requesting a phone contract • Anyone you have given permission to • Anyone with a legitimate reason to know • YOU!
  31. 31. How does this help you? • Provides you with more credit options • Reduces the cost of credit • Reduces the need for physical collateral • Allows for faster decision taking • Prevents over indebtedness • Prevents ID fraud
  32. 32. Benefits of a Credit Bureau Score and Report for you • Improved access to credit • more options for more people • Better terms and reduced interest rates of borrowing • Reduce the need for physical collateral • Pre-approval to credit rather than instantly refused • Quicker decisions • Reduces the risk of over indebtedness • Reduces the risk of fraud, ID theft and money laundering • Enables customer to effectively check the information used by lenders and challenge decisions • A fairer way of assessing your access to credit A financial footprint enables lenders to determine whether to provide credit terms and at what rates.
  33. 33. Benefits for the Lender • Using shared data to check data accuracy and supplement missing information • Can offer better terms and rates • Can offer credit terms to more people where as before they may have instantly declined individuals and businesses • Alerts them if a customer is getting into difficulty i.e. someone may stop paying another lender
  34. 34. Benefits – the bigger picture Credit Bureaus can: • Drive steadier financial market development • Improve economic stability • Create greater opportunity for economic growth • Create greater productivity • Increase repayment rates, less defaults • Reduce in interest rates • Enable tracking and monitoring of economic activity at a macro and geographic level and of financial service providers • Promote responsible lending • Improve economic country scores from organisations such as Standard & Poor, Moody’s and Fitch
  35. 35. The Evidence from the beginning Small firms benefit from credit bureaus Estimates based on data on 5000 firms in 51 countries Source: Love & Mylenko (2003). 49% 27% Without credit bureau With credit bureau % of Small Firms Reporting High Financing Constraints 28% 40% Probability of Obtaining a Bank Loan for a Small Firm Without credit bureau With credit bureau
  36. 36. What do we do? Our focus is on complete solutions in credit risk management: - Providing scoring, decision engines, pricing modules, etc. - Fraud prevention tools, work flow collection software & other credit tools - Consulting on credit processes, risk management, seminars and training
  37. 37. Creditinfo has developed..... • A modern software solution, which covers requirements for a full-file, non-fragmented, private credit reporting system for sharing positive and negative information among different types of financial and non- financial institutions • A strong partnership with local credit providers; banks, MFIs, loan companies; telcoms; utility companies; insurance companies; etc
  38. 38. Why Creditinfo’s Credit Bureau Solution works • Proven implementation • Consistent and accurate data from various approved and confirmed sources • Regulation, Monitoring, Audits and Control • Flexible, transparent and easy to understand reports • Can cover all data subjects, creating financial inclusion • Includes both traditional and alternative data • ALL relevant data • Includes positive and negative data • Collaborative approach to build processes and systems for data sharing
  39. 39. What should you do to improve your access to finance? • Take control of your financial footprint • Take an active role in managing your credit • Review the things that effect your credit score • Review your credit report regularly (annually / bi-annually)
  40. 40. Creditinfo Credit Bureau DEMO
  41. 41. Summary – What is a Credit Bureau An organisation which collects and maintains credit information on individuals and businesses and allows lenders to access that data to make informed credit lending decisions
  42. 42. SUMMARY: What does a Credit Bureau do? Provides a credit score / report which tells a lender the risk factor for that client so the lender can determine whether to accept a client or not and the rate the client qualifies for.
  43. 43. Questions and Answers
  44. 44. Create your financial footprint • • This data will be upload at a later date into the Credit Bureau system • We will contact those who have provided data.
  45. 45. For clarification or further information please contact us Shane Moldenhauer Head of Business Development East Africa Tel: +254 701 057 702 E-mail: Skype: shane.molden Websites and Social Media Company Linked In page : Company Facebook page: Company Twitter page: