The private CRB is expected to reduce the Non Performing Loan (NPL) portfolios and also increase access of credit by the private sector
Banks and financial institutions in Rwanda will soon share data with each other, according to Michael Malan, the Managing Director, of Compuscan, a newly established credit bureau.
A Credit Reference Bureau (CRB) is an entity that collects and compiles information concerning the repayment behavior of individual and business, for resale to banks and other credit providers.
“To a large degree we rely on the media to help the public understand the benefits of this project,” said Malan, who was sensitising journalists about the benefits of the Credit Bureau at Laico Umubano hotel on Monday.
Compuscan has been authorised by the National Bank of Rwanda (BNR) to develop, operate and maintain a Credit Bureau in Rwanda under a three year exclusive agreement.
In Rwanda it will operate in such a way that a customer provides information when opening an account or applying for credit, the customer then signs “acknowledgements/consents” to allow information to be submitted to credit bureau.
Credit information providers submit information to the credit bureau which updates it regularly. The credit bureau collects, validates and merges information into its database for use in generating a credit report
The new private bureau will replace the Centrale des Risques et des Impayés (CRI), a public credit bureau operated by the central bank.
The national bank says that the CRI, which was established in 1990, has many deficiencies which limit it to meet the needs of market place.
According to statistics, the CRI is used by commercial banks (via website and direct link) and 13 microfinance institutions (via website only). The database holds around only 61,000 current accounts on about 50,000 borrowers in Rwanda.
To address the deficiencies, the private Credit Bureau will bring on board other organisations like utility companies, telecommunication companies and insurance companies.
Malan said that the provisions of the credit bureau services entails that bank and others will share data about how loans are paid with each other to a central register which can be accessed when new credit facilities are being considered, or when limit reviews are undertaken.
“The principle of data reciprocity will apply. Users of data will be required to share data in order to view data ensuring fairness for all,
“The new national ID number will be used as a primary key to enable linking people together,
“Other forms of ID are considered but not uniquely. Once the data is linked we then display it for use and interpretation relative to any available information about the debtor.”
The credit bureau is viewed as something that will enable Rwanda meet its doing business ranking targets.
The 2009 World Bank Doing Business Survey ranked Rwanda’s credit information system a “2” out of a possible “5”. The central bank said that this ranking is due in large part to limitations of the CRI.
“The CRI was designed for use as a supervisory tool, and as such, it focuses on the monitoring of large loans the default of which could weaken the financial service industry,” said Edward Gasore in the BNR’s Credit Bureau Department said.
The CRI collects both positive and negative data, but only on loans that exceed Rwf500,000 and such its usefulness as a credit information service is limited by type of credit data captured.
The private CRB is expected to reduce the Non Performing Loan (NPL) portfolios and also increase access of credit by the private sector.
The bank’s NPL level reduced significantly from 13.8 percent at the end of December 2007 to 9.8 percent at the end of 2008. Malan said that this should reduce to between three percent and four percent.
Compuscan has presence in nine African countries, servicing a branch network of over 49,00 lending institutions which include banks, MFI’s, public and private companies, Non Government Organisations (NGOs) and SACCOS
According to Malan, the company also provides credit scoring and consultancy solutions for key analytical and prediction modelling projects.