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The 2nd East African Community Regional Credit Information Sharing Conference Sub Saharan Africa Credit Bureau Program Access to Finance Advisory Services. Nairobi, September 2013 Moyo Violet Ndonde & Agata Szydlowska. Credit Reporting Trends. Introduction – Global Credit Reporting Program
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The 2nd East African Community Regional Credit Information Sharing Conference Sub Saharan Africa Credit Bureau Program Access to Finance Advisory Services Nairobi, September 2013 Moyo Violet Ndonde & Agata Szydlowska
Credit Reporting Trends • Introduction – Global Credit Reporting Program • Global Trends within Credit Bureau Industry – Recent Developments • Africa “Decade of Change” – Impact on credit bureau trends
IFC’s Global Credit Bureau Program - Projects • Starting from 2005 IFC & World Bank focused on establishing Credit Bureaus worldwide. Why? Middle East & North Africa Asia & Pacific Sub – Saharan Africa Latin America & Caribbean Eastern Europe & Central Asia • Argentina • Barbados • Chile • Guyana • Jamaica • OECS (**) • Trinidad & T • Afghanistan • Algeria • Djibouti • Egypt • Jordan • Lebanon • Libya • Iraq • Morocco • Oman • Palestine • Syria • Tunisia • U.A.E. • Yemen • Cape Verde • DRC • Ethiopia • Ghana • Mauritius • Mozambique • Nigeria • Rwanda • Senegal • Tanzania • UEMOA (*) • CEMAC (***) • Bangladesh • Cambodia • India • Lao • Nepal • Pacific Islands • Azerbaijan • Kyrgyzstan • Tajikistan • Uzbekistan • Mongolia • Moldova, • Kossovo (*) Western Africa Economic and Monetary Union - 8 countries (**) Organization of Eastern Caribbean States - 7 countries (***) Central Africa Economic and Monetary Union – 6 countries
In developing countries, almost 2/3 of the population do not have access to finance
Direct Correlation between Lack of PCBs and Low Access to Credit! • Countries withoutPrivateCredit Bureau (PCB) are the sameones, whereacces to creditismostdifficult, limited and bureaucratic! • Afrcica Region remains with the lowest coverage of credit bureaus (lowest access to credit), especially the Sub Saharan Africa
Global Trends – International Coverage Expanding Source: Doing Business 2011
Credit Bureau Coverage Across Regions • LAC continues to lead, being the second strongest region after OECD in the extent of credit bureau coverage • Sub-Saharan Africa has the lowest coverage • MENA significantly improved over the past 8 years Source: Doing Business 2013
What has changed in 8 years? A glance at state of coverage of credit bureaus ECA, EAP and MENA are big reformers demonstrating significant leaps in improving the coverage of private credit bureaus Source: Doing Business 2013
Regional Comparisons for Credit Information Indexsimilar to OECD, ECA leads • ECA is the best performer out of all emerging market regions • MENA is ahead of LAC, which demonstrates the big progress in reforms in MENA region for the past years • EAP and SSA lag significantly behind as the lowest performer in credit information sharing market Components of the Credit Information Index • Both firms and individuals are listed • Both positive and negative information • Retailers and/or utilities submit data • 5 or more years of historical data • All loans included above 1% GNI per capita • Consumer right to inspect is guaranteed by law Source: Doing Business 2013
What has changed in 8 years? A glance at the state of credit information sharing across regions Sub – Saharan Africa and East Asia & Pacific have made small progress on improving the credit information index. Europe & Central Asia and MENA are the regions with the biggest progress over the past years. At the same time there is a slight decline rate in LAC region. Source: Doing Business 2013
Global Trends – practical terms • Positive & Negative Data Sharing (mandatory) • Increase of MFI & SME sector contribution • Alternative Data Inclusion in credit reporting ( company registry data, utility companies, mobile phone providers, retailers) • Increase Supervision & Governance focus – Responsible Finance approach as a consequence of Global Crisis in Western World.
Contributors of Data to Credit Bureaus • Over 50% of bureaus reportedly receive information from MFIs • Data quality and coverage of the MFI market remains an issue, as most bureaus capture only data from regulated MFIs (if any) • More PCBs started to get information from additional sources, like employers, statistic agencies, ID , bankruptcy agencies Source: Doing Business 2013 : Data based on 114 CBs that provided information
Credit Bureaus that collect data from utility providers (in alphabetical order) Ecuador Estonia Fiji Germany Guatemala Honduras Iceland Israel Kenya Malaysia Mexico Namibia New Zealand Argentina Armenia Australia Bolivia Bosnia and Herzegovina Botswana Bulgaria Canada Colombia Costa Rica Cyprus Denmark Panama Papua New Guinea Paraguay Peru Poland Puerto Rico Rwanda Saudi Arabia South Africa Swaziland United Kingdom Uruguay Source: Doing Business 2013
Africa- Decade of Change • Democratization Increased Transparency Improved Legal Framework • Robust Economic Development Increased FDI flows • Deepening of Financial Sector New Financial Services Reaching out to broader clientele • Increasing Importance of SME & MFI sectors
Credit Reporting Trends in Africa • Implementation of credit reporting frameworks to enable sharing of credit information (Ghana, Rwanda, Kenya, Tanzania, UMOA and others) • Focus on Private Credit Bureaus rather than public credit registries as a tool to share information • Start of sharing positive and negative data e.g. Rwanda, Ghana, Tanzania pilot in Kenya • Inclusion of SME and MFI data • Focus on capacity building for Supervision of credit reporting
“GETTING CREDIT” COUNTRY RANKINGS (OUT OF 185) SSA Country Rankings (DB13) Highest performers Countries with most reform potential Source: Doing Business 2013
SSA Rankings: Depth of Credit Information across countries Depth of credit information index (0-6) South Africa and Rwanda are the highest performers, whereas numerous countries have the largest improvement and reform potential Source: Doing Business 2013
SSA Rankings: Private Bureau Coverage still low Credit Bureau coverage (% of adults) Lack of private credit reporting infrastructure: zero coverage Source: Doing Business 2012
Agenda • Program objective • Donors • IFC products & Services • IFC Role • Delivery Model • Clients & Stakeholders • Portfolio & Pipeline projects • Achievements & Challenges • Opportunities going forward • BCEAO and Ghana case study
Program Objective • Support IFC clients and stakeholders to develop or improve credit reporting systems – private, public or mixed reporting models.
Donors Government of Switzerland Austrian Ministry of Finance
Why? Huge financing gap in Sub Saharan Africa Percentage of unmet credit needs (Smaller type refers to the total value of the gap in each region) Central Asia & Eastern Europe $ 322-394 billion 29-36% High-income OECD $1,035-1,265 Bn Middle East & North Africa $323-395 billion 6-8% East Asia $636-777 billion 308-376% 14-17% South Asia $186-228 billion 18-22% Latin America $558-682 billion 116-142% Sub-Saharan Africa $118-145 billion <10 $3.2-3.9 trillion globally 10-29 338-413% 30-59 >60 Source: MSME database 2011, McKinsey & Company
Why? A solid financial infrastructure serves both ACCESS TO FINANCE and FINANCIAL STABILITY
IFC Products & Services • Technical support for private CRB development – model selection, business planning, sourcing, selection and contracting of technology vendors for CRB deployments, country market assessments. • Technical support for Public Credit Registry development – development/review of bidding/RfP documents, independent advisor support during early stages of systems deployment. • Legal/Regulatory development – technical input to CR legislation, regulation, Codes of Conduct.
IFC Products & Services • Development of data elements, Data Input File Formats, Common data formats and business rules. • Capacity Building – lenders, regulators, consumer groups – e.g., use of credit bureau data across the account life cycle, data quality, operational aspects, credit bureau supervision. • Knowledge Sharing – events, publications & training.
IFC Products & Services • Technical support to increase participation of non-regulated credit providers: e.g., MFI’s – technical & risk assessments, road map development. • Support establishment of national working groups andprovide technical support to WGs.
IFC Role & Delivery Model • Honest broker/independent advisor • Global Credit Bureau & Risk Advisors supported by regional and local staff • Advisory Service projectinitiated through a Legal agreement with Client • Requirement for client contributions
Clients & Stakeholders • Central Banks • Bankers Associations • Credit Bureaus • Consumer/MSME Associations
Portfolio, Closed & Pipeline Projects • Ghana • Tanzania • Ethiopia • Sierra Leone • Liberia • Burundi • WAMU (UEMOA) • Zambia, Malawi, Nigeria & SADC (pipeline)
Achievements • Private Credit Bureaus/Public Credit Registry deployed/improved in Ethiopia, Tanzania & Ghana and currently collect credit information. • Market assessments & roadmaps developed for Sierra Leone, Liberia, Burundi, DRC, WAMU. • capacity building workshops conducted for lenders in Ghana, Tanzania, Nigeria, Liberia, WAMU, Burundi, Ethiopia.
Achievements • Credit Reporting legislation/regulation adopted or revised in 11 countries (including WAMU). • Common data format adopted in Ghana. • Processes and toolkit for credit reporting supervision developed and utilized. • Financial literacy material developed and tested. • Site and exposure visits facilitated for stakeholders in Ghana, Tanzania, Ethiopia, Sierra Leone.
Opportunities • Increased interest and momentum for Credit Reporting in SSA. • Regional Solutions – WAMU, SADC, CEMAC. • Leverage IFC and stakeholder experience. • Innovation – develop and adapt models to specific country requirements and needs. • Collaboration with other partners – FinMark Trust, KfW etc.
Challenges • Data quality • Suitable CR models in small markets • Capacity constraints • Impact achieved in the medium to long term
SSA Case Studies • CLIENT NAME: Bank of Ghana • DESCRIPTION: Provision of advisory services to Bank of Ghana for credit reporting development. • PRESENTER: Mr William Nyavor Bank of Ghana • CLIENT NAME: BCEAO- Central Bank of UMOA • DESCRIPTION: Provision of advisory services to establish regional private credit bureau • PRESENTER: MrSymphorienAgbessadji BCEAO