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!