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Credit Reporting for FullFinancial Inclusion
Financial Inclusion 2020 Credit Reporting Working Group
September 2013
CreditReportingFinancialCapability ClientProtectionAddressing CustomerNeeds
Technology-EnabledBusinessModels
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bout the FI2020 Roadmap Working Groups
Whatwillittaketoachieveastateoffullfinancialinclusion?In2011,theCenterforFinancialInclusionaskedthis
questioninaglobalsurvey,andover300practitionersgavetheirperspectivesonthekeyopportunitiesand
obstaclestofinancialinclusion .
Basedontheresponses,theCenteridentifiedfivepriorityfocusareasthatarekeytoachievingfinancialinclusion,
whichhavebeenusedasthebasisforabroadconsultativeprocesstowardaRoadmaptoFullFinancialInclusion.
Overthecourseof2012and2013,thisprocessengageddozensofexpertsandindustryparticipantsindeveloping
anaction-orientedblueprintforreachingnewandunderservedmarkets.Thefivefocusareasare:
AddressingCustomerNeeds ,chairedbytheConsultativeGrouptoAssistthePoor(CGAP),focusesondeepeningourunderstandingofclientneedsandtranslatingthatknowledgeintopracticewhile
expandingtherangeoffinancialservicesavailabletounderservedmarkets.
Technology,chairedbyVisa,analyzesthepotentialofnewtechnology-intensivechannelstoreachnewcustomers,loweroperatingcosts,increasesecurityanddiversifyfinancialproductsavailabletolow-incomeclients.
FinancialCapability,chairedbyCiti,focusesonempoweringclientstoknowtheirrightsasconsumers,andhavetheskills,attitudes,aspirations,andconfidencetoexercisethoserights.
ClientProtection,chairedbytheSmartCampaign,outlinesstepstodeepentheimplementationofclientprotectionmeasuresforthebenefitofconsumersandstabilityofmarkets.
CreditReporting,chairedbytheInternationalFinanceCorporation(IFC),promotesextendingcreditreportingsystemsinordertoexpandaccessfornewclientswhilemanagingriskforfinancialinstitutions.
Eachofthefiveworkinggroupshascraftedaroadmapthatasks:Whatisthevisionforthistopic?Whatstandsin
thewayofachievingthevisionandwherearethegreatestopportunities?Whataretheenablingactionsand
correspondingactorswhocanadvancethevision?
The Main IdeaWhile experts agree on theprinciples of effective creditreporting, challenges toestablishing credit reportingsystems arise from the needto bring regulators, financialservices providers and creditreporting providers togetheraround a business model
that works for all.
Effective credit reporting forBOP customers requiresseamless data from thesmaller financialinstitutions those customertend to use often requiringregulatory change. Smallerinstitutions may needassistance to prepare their
internal systems to workwith credit reporting.
New approaches arespringing up that usealternative sources,such as mobile phonedata and bill paymentrecords, to overcomethe thin files of newand low-incomecustomers.
Client data privacymust be respected,with rules that giveclients somecontrol, such asaccess to theirrecords, a way tocorrect errors, andsome say over third
party use.
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I.Introduction
Effectivecreditreportingsystemsenablefinancialinstitutionstolearnaboutthepastbehaviorof
prospectiveclients1efficientlyandfromreliablesources.Whenthatinformationincludespeoplewho
arerelativelynewtoformalfinancialservices,financialinstitutionsareenabledtoprovidethema
deeperarrayofproductofferingsoreventoservethemforthefirsttime.Inthisway,creditreporting
systemscancontributesignificantlytofinancialinclusion.Theavailabilityofcreditreporting
informationaffectsnotonlytheprovisionofcredit,butalsotheabilitytoofferbankaccounts,insurance
andotherproducts.
Creditreportinghasimportantbenefitsforfinancialstability.Byprovidinginformationonclients
financialbehaviorandoutstandingdebt,creditreportingsystemshelpfinancialinstitutionslendto
clientswhocansustainablyusecredit.Atalargescale,thisisessentialforpreventingover-indebtedness
crises,suchasthosethathaverecentlyaffectedthefinancialsectorsofanumberofcountries.
Expertsagreebroadlyontheprinciplesofeffectivecreditreportingsystems.In2011,ataskforce
assembledbytheWorldBankGrouppublishedtheGeneralPrinciplesforCreditReporting,which
articulatedaconsensussetofstandardsforeffectivecreditreportingsystems.Theseprinciplesprovide
goodpracticeguidancetonewordevelopingcreditreportingsystemsandunderpinthisroadmap.
Despitethepotentialofcreditreportingtocontributetogreaterinclusion,thedevelopmentofeffective
creditreportingsystemsthatworkforpeopleatthebaseoftheeconomicpyramidhasremaineda
challenge.Manyactors,includinglegislators,regulators,financialinstitutions,creditreporting
companiesandmoremustcometogetheraroundcommonsolutions.Thebusinessmodelsmustwork
forboththeprovidersofinformationandtheusers,whileprotectingclientsrights.Inmanycountries,
creditreportingisnotyetarealityforprospectivebaseofthepyramidclients,butiftheprinciplesare
consistentlyapplied,thiscouldchangedramaticallyby2020.
1Whilewerecognizethatshadesofmeaningexist,withinthisdocumentthetermsclient,customerandconsumer
areusedinter-changeably.
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TheGeneralPrinciples
TheGeneralPrinciplesaimatthefollowingpublicpolicyobjectivesforcreditreportingsystems:Credit
reportingsystemsshouldeffectivelysupportthesoundandfairextensionofcreditinaneconomyasthe
foundationforrobustandcompetitivecreditmarkets.Tothisend,creditreportingsystemsshouldbe
safeandefficient,andfullysupportiveofdatasubjectandconsumerrights.
Data
GeneralPrinciple1: Creditreportingsystemsshouldhaverelevant,accurate,timelyandsufficient
dataincludingpositivecollectedonasystematicbasisfromallreliable,appropriateandavailable
sources,andshouldretainthisinformationforasufficientamountoftime.
DataProcessing:SecurityandEfficiency
GeneralPrinciple2: Creditreportingsystemsshouldhaverigorousstandardsofsecurityandreliability,
andbeefficient.
GovernanceandRiskManagement
GeneralPrinciple3: Thegovernancearrangementsofcreditreportingserviceprovidersanddata
providersshouldensureaccountability,transparencyandeffectivenessinmanagingtherisksassociated
withthebusinessandfairaccesstotheinformationbyusers.
LegalandRegulatoryEnvironment
GeneralPrinciple4: Theoveralllegalandregulatoryframeworkforcreditreportingshouldbeclear,predictable,non-discriminatory,proportionateandsupportiveofdatasubjectandconsumerrights.The
legalandregulatoryframeworkshouldincludeeffectivejudicialorextrajudicialdisputeresolution
mechanisms.
Cross-BorderDataFlows
GeneralPrinciple5: Cross-bordercreditdatatransfersshouldbefacilitated,whereappropriate,
providedthatadequaterequirementsareinplace.
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II.AVisionforCreditReporting
AttheClientLevel
Whileclientsrarelyinteractwithacreditreportingsystem,inastateoffullfinancialinclusionitis
almostcertainthatthosewhopaypromptlywillbenefitfromtheservicesofsuchasystem. Clients
willbeabletousetheireconomichistoriesastestimonialstotheircreditworthinessandsuitabilityas
usersoffinancialservices.Thisinformationwillincludenotonlypriorinteractionswithformalfinancial
institutionsbutalsointeractionswithentitiessuchasutilitycompanies,landlords,telephonecompanies
andothers.Clientswillbeincentivizedtobehaveresponsibly,knowingthatdefaultsanddelinquency
willaffecttheircontinuingaccesstoservices.Theywillunderstandhowinformationaboutthem
translatesintoacreditscore,howtheycanimprovetheircreditworthiness,andhowtheycanconfirm
thatinformationaboutthemisaccurate.Clientswillbeuniquelyidentified,andwillcarrytheirfinancial
historieswiththemwherevertheygo,includingacrossborders,givingthemfreedomtochooseamong
providers.Thispaperenvisionsanidealstateinwhichthesebenefitsareenjoyedbyallpeoplewhoareinterestedinusingfinancialservices,includingsegmentsthatarecurrentlyunreachedordiscriminated
against.
AttheProviderLevel
Financialservicesproviderswillvaluecreditreportingservicesasanessentialpartoftheirrisk
managementprocesses.Theywillbenefitfrombeingabletopricetheirserviceswithrisktakeninto
account.Financialinstitutionswillprovideaccurateandtimelyinformationtocreditreportingsystems,
capturingbothpositiveandnegativeinformationaboutclientbehavior,withoutincurringexcessive
costs.Eachfinancialservicesproviderwillhaveclearandefficientinternalprocessesforprocessing
informationfromcreditbureaus,resolvingerrorsandhandlingdisputes,andsubmittingdatatocredit
reportingsystems.
AttheMarketLevel
Thecoreofthevisionadvocatedbytheworkinggroupisforeverycountryintheworldtohave
implementedtheGeneralPrinciplesforCreditReportingtoasubstantialdegreeby2020.I nthe
idealstate,therewillbeconsensusamongthefinancialservicesindustryandregulatorsthatcredit
reportingisacriticalcomponentoftheinfrastructureofthefinancialsector.Inordertosupportacredit
reportingsystem,thatinfrastructuremustfacilitatethecollection,protectionanddisclosureof
information.Creditreportingsystemswillcovereveryonewhocouldusefinancialservicesandconsents
totheirdatabeingshared,particularlylow-incomepopulations,andtheywillcoveralltypesoffinancial
institutions,fromfullyregulatedtosemi-formal.Non-financialservicesproviders,suchastelecomsand
utilitycompanieswillalsoseethevalueinsharinginformationandwillparticipateincreditreporting
systems.
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III.CurrentStatusandIssues
Creditreportingaroundtheworldhasgrownsignificantlyoverthelastseveraldecades.TheWorldBankandInternationalFinanceCorporation(IFC)jointreport,DoingBusiness2013,statesthat
approximately146countriesaroundtheworldhaveeitheracreditbureauoracreditregistry.The
numberofcreditbureausaroundtheworldbetween1990and2011isestimatedtohavetripled,with
muchofthisgrowthhappeninginCentralandEastAsia,theCaribbeanandinEurope.
Despitethisgrowth,creditreportingremainsunderdevelopedinmanycountries,andarelativelysmall
numberofcountrieshaveeffectivecoverageatthebaseofthepyramid.Manymarketsareevolving
fromapastinwhichcreditreportingmayhavebeenlimitedtocommercialbanks,offeredbyonlyone
serviceprovider,withdataonlyonloandefaultsofblacklistedclients,updatedinfrequentlyand
unusableacrossborders.Ifcreditreportingistobeusefulenoughtocontributetofinancialinclusion,
eachoftheselimitationsmustbeovercome.TheConsultativeGrouptoAssistthePoor(CGAP)andIFCsCreditReportingattheBaseofthePyramid:KeyIssuesandSuccessFactorsprovidesadeeperlookat
theseissues.
TheGeneralPrincipleslayouttheconditionsthatenableaneffectivesystem,startingwithdataquality.
Onlyifdatacoverspositiveaswellasnegativebehavior,comesfromrelevantsources,andiscurrent
andaccuratewillitbevaluableenoughforproviderstoactivelyparticipateincreditreportingsystems.
Achievingthislevelofdataqualityinturnrequiressecureandefficientprocessingandgovernancethat
allowsallpartiestoputconfidenceinthesystem.Confidenceinthesystemissupportedbyaclearand
predictablelegalenvironmentthatbalancesthecollectionandsharingofdatawithconsumerrightsand
whereultimatelyconsumerswouldtransporttheircredithistorieswhentheymigrateacrossborders.
Clientinformationmustfirstandforemostbeprotected,requiringthatnecessarylegislationcurtailthe
potentialexploitationormisuseofclientinformationbyactorswithprofit-seekinginterests.
Effectivecreditreportingsystemsmustalsobeviablebusinesses.Amarketisrequiredinwhichcredit
reportingservicesselltheirreportstofinancialinstitutions,whocontributetheircustomerdataasa
conditionforreceivingreports.Creditbureausarefinanciallyviableonlyifasufficientnumberof
financialservicesprovidersarewillingtobothcontributetheirdataandpayforreports.Financial
institutionswillonlyuseandpayifthereportsenhancetheirabilitytoattractcustomersandmanage
risk.Atthebaseofthepyramid,whereloansandaccountsaresmall,thesechallengesareheightened.
Becauseofthemultipleinterestsinvolved,theprocessofestablishingawell-functioningcreditreporting
systemrequiressustainedcoordinationamongdifferenttypesofactors.Governments,becauseoftheir
responsibilityforconsumerrightsandfinancialsectorstability,aregenerallycalledontoleadthesecoordinationprocesses.Thishasoftenstretchedthecapabilitiesofregulatorsandpolicymakers.
Governmentscanbenefitfrommodelregulations,newlegislationandpolicyassistance.From
understandingthecomplexitiesofsettingupasoundcreditreportingsystem,topromotingcompetition
amongproviders,tothechallengesinoverseeingthissystem,capacitybuildingforpolicymakersand
regulatorsisaclearneed.TheWorldBankandtheIFChavetakenleadershipasmultinationaldonorsto
supportthiswork.
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New credit reporting technology will
not work unless you build capacity
and educate people on how to use it.
The credit report might be there, but
the user has to look at it and have the
systems and know-how to use this
information effectively.
Tony Lythgoe, Principal Financial
Specialist & Head, Financial
Infrastructure, IFC
Inconsideringhowtocreatecreditreportingsystemsthatcontributetofinancialinclusion,theworking
grouphighlightsthreeimportantchallengesthatareparticularlysalientforlowerincomecustomers:
coverageofthinfilecustomers,buildingthebusinesscaseforbaseofthepyramidproviders,and
protectingcustomerrights.
InclusionofPeoplewithThinFilesTraditionally,creditreportingwaslimitedtocommercialbanksorinsomecasesotherregulated
financialinstitutions.Effectivecreditreportingforfinancialinclusionrequiresparticipationfromall
financialservicesproviders,bothregulatedandunregulated.Inmanycountries,policychangemusttake
placetoenablecreditbureaustoincludeprovidersatthebaseofthepyramidotherthanbanks,suchas
microfinanceNGOs,financecompaniesandcreditunions.Suchchangemayrequireworkingacross
regulatoryagenciesthatoverseesuchinstitutions,and,asdiscussedbelow,anotherchallengeisto
ensurethatsmallerfinancialservicesprovidersarewillingandabletoparticipate.
Openingcreditreportingtothefullrangeoffinancial
servicesproviderswillenablecoverageofmanylower
incomecustomers.However,whataboutthefinancially
excludedorcustomerswhohaveneverreceivedaloan
fromaformalfinancialinstitution?Muchofthefinancial
activityofthepoortakesplaceintheinformalsector
wheretransactionsareunrecordedandcannotbeusedto
buildtheindividualsfinancialhistory.Thepoorareleft
withthinfilesandreputationalcollateralthatisnot
sufficientlydocumentedoraccessibletoestablishcredit
worthiness.
Aprerequisitetocoveringnewcustomersistheabilitytoestablishuniqueidentity.Creditreportingsystemsuseavarietyofinformationtoestablishidentity,but
intheabsenceofwidelyusednationalIDcards,financiallyexcludedpeopleoftenlacktheotherformsof
identificationneededtolinkbehavioraldatatothecorrectindividual.Thereisongoingdebateaboutthe
extenttowhichtheimplementationofnationalidentificationsystemscanalleviatethisproblem,asone
identifiermaybeinsufficientforeffectivelyestablishingfinancialidentity.
Thenextchallengeistoobtainrelevantdataonclientsnewtofinancialservices.Verypromising
developmentsarenowoccurringintheuseofalternativedatafromsourcesotherthanfinancial
institutionsbasedonactivitylowincomepeoplealreadyengagein.Thesesourcesincludephoneusage
andpayments,utilitypayments,rentalinformation,remittancedata,behavioraldata,andevensocial
mediatodemonstratereputationalcollateral.Successfulmodelsthatincorporatenon-traditionaldatacoulddramaticallychangethecreditreportinglandscape.
Today,anumberofstart-upcompaniesworkwithalternativedatatobuildnewmodelsforassessing
creditworthiness.Newdataanalytictechniquesextractusefulinformationfromnewlyabundant
sources.OneofmanyexamplesisCignifi,whichoperatesinBrazilandMexico.Cignifiusescomplexdata
analyticsofmobilephonebehaviorandpaymentstocreateanassessmentofcreditworthiness(for
financialservicesproviders),predictchurnbehavior(fortelecommunicationcompanies),andprovide
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First Access to Base of the Pyramid
First Access is a social enterprise that
facilitates access to financial services
and other products designed for
consumers at the base of the
pyramid, through its patent-pending
technology. They process and
understand new types of consumer
data using a wide range of alternative
data sources, including mobilephones, in order to bring people with
thin files into the system. First Access
launched in Tanzania, with plans to
expand to other countries in East
Africa.
insightsonoptimalproductofferings.AlthoughtheCignifimodelisnew,itdemonstratesthepotential
forbusinesssolutionsbasedondatasharingandanalysis.Whilemuchofthistypeofinnovationistaking
placeinstart-upcompanies,manyoftheestablishedcreditbureausarealsoexploringthespace.
Regulatoryrestrictionsandmarketforcesmaycurrentlystandinthewayofsuchalternativecredit
reporting.Rulesmaypreventcreditbureausfromobtainingsuchinformation,andrevisionsmayrequire
cooperationofmultipleregulatoryagencies(forexample,telecommunicationcompanyregulators).
Moreover,alternativedataproviders,suchastelecomscompanies,maynotwishtovoluntarilyshare
theirdatainadesiretomaintainacompetitivemarketposition,andtheywilleitherneedtobepaidor
toreceivesomebenefitfromuseofthecreditreportingservices.Accordingly,iftheopportunities
presentedbyalternativedataaretoberealized,market-buildingisrequiredsothatalternativedata
providershaveabusinesscaseforparticipatingindatasharingandthelegalandregulatory
environmentallowsforit.
CreatingIncentivesforBase-of-the-PyramidFinancialInstitutionsThepotentialbenefitsofcreditreportingforbaseofthepyramidfinancialservicesprovidersareclear.
Replacingexistingresource-intensivemethodsforassessingcredit-worthinesswiththeuseofacredit
scorecanautomatemuchoralloftheloan-approvalprocess,cutcosts,and,itishoped,allowthe
institutiontoprovideclientswithfasteraccesstocredit.Butgettingtothosebenefitsisnotsoeasy.
Providersservingbaseofthepyramidcustomershaveusuallydevelopedwithoutbenefitofcredit
bureaus,sowhencreditbureausbecomeavailabletheymayneedbothencouragementandassistance
tousethem.Forexample,themicrofinanceindustrydevelopeditsowncreditassessmentmethods,
suchasgrouplendingorhigh-touchinteractionbetweenloanofficersandborrowers.Many
microfinanceinstitutionsprefernottoshareinformationtopreventcompetitorsfromaccessingtheir
clients.Providersmayalsofearthattheuseofacreditreportingsystemwillleadsomeexisting
borrowerstobedisqualified.
Ascreditreportingbecomesmorenecessarydueto
heightenedcompetition,microfinanceinstitutionshave
greaterincentivestousecreditreporting.Evenso,the
useofcreditreportingbyamicrofinanceinstitution
requiressubstantialchangetotraditionaloperationsand
willrequiredocumentingindividualcreditbehaviorwithin
grouplending.Ifcreditscoresareanadd-ontoexisting
credit-assessmentmethodologies,theprocesscanfeel
unnecessaryandcostly.Moreover,forcreditreporting
servicestobeuseful,theywouldneedtoalignwiththe
servicestheseprovidersoffer,likegrouplendingandveryshort-termloans.Ifthedatainacreditbureauisonly
updatedonceeveryseveralmonths,itmaynotbeuseful
tomicrofinanceinstitutions.Consequentially,credit
bureausshouldupdateinformationasfrequentlyas
possiblewithreal-timeupdatesasthegoal.
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Overcomingthegapbetweencreditreportingservicesandbaseofthepyramidprovidersrequiresboth
tomakechanges.Thecreditreportingindustrywillneedtomakeadjustments,forexamplethrough
standardizingdefinitions(e.g.,thedifferencebetweenmicroandSMEloans)anddata-collectionformats
(e.g.,pointatwhichaloanbecomespastdue).
Baseofthepyramidserviceprovidersmayalsohavetochangetheiroperations.Theywillneednewor
updatedsystemstoenablethemtoexchangeinformationwiththecreditbureau.Specializedstaff
needstobehiredandtrainedinusingthesesystemsandcommunicatingdataproperly.Theymust
complywithqualitystandards,becausesubmittingpoor-qualitydatacanhaveimportantconsequences
forconsumersandproviders.Dependingonhowitplanstousecreditreports,aprovidermayneedto
changelendingmethodologiesandotheroperations.
Buildingthiscapacityrequireshumanandfinancialresources.Smallerfinancialinstitutionsmayoften
finditdifficulttoraisethefundsneededtobuildtheirinstitutionalcapacity.Donorsandsupport
organizationshaveanopportunitytosupportthisprocess,withtherationalethatexpandingcredit
reportingwillincreasefinancialaccesstomarginalizedpopulations.
Inaddition,therunningcostsassociatedwithusingcreditreportingservicescausesomesmaller
financialservicesproviderstoquestionthesustainabilityofparticipatingincreditreportingsystem
(althoughtherearesometimesmisconceptionsaboutthescaleofsuchcosts).Theseincluderoutine
subscriptionandinquiryfees,aswellasdatadisputeresolutioncosts.Onlywhenprovidersare
convincedofthevaluefortheirmoneywilltheyusecreditbureauservicesatthevolumecreditbureaus
needtobefinanciallyviable.
ProtectingConsumerDataDataprivacyrightsareimportantforfinancialconsumers,whetherrichorpoor.Asthecreditreporting
landscapechanges,regulatorschargedwithupholdingtheserightsmustrespondtothenewopportunitieswithrulesthatpreservethoserightswithoutstiflingthedevelopmentofcreditreporting
systems.Governmentsmayneedtoamendrulesgoverningwhoownsandwhocanusedatainorderto
openthewayforalternativedatatobesourcedandanalyzed.Today,alternativedatastart-upsand
pilotsarepayingattentiontonationalpolicyandregulationonusageofdatawhendecidingwheretotry
newmodels.
TheGeneralPrincipleoncustomerrightsstatesthatcustomersshouldbeallowedtogiveordenytheir
consentforuseofdata,assuredofaccesstodatacollectedonthemandofferedapathtocorrecterrors
inthedata.Inorderforprivacyrightstobeprotected,customersmustbeinformedabouthowcredit
reportingaffectsthem.Theirrightsandresponsibilitiesasconsumersoffinancialservicesneedtobe
transparentandeasytounderstand.Giventhatcreditreportingatthebaseofthepyramidisjustemerginginmostmarkets,initiativesbypolicymakers,non-profits,financialservicesproviders,andthe
creditreportingindustryareneededtoeducateandempowercustomersaboutcreditreporting.
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Theworkinggrouprecommendationsarestraightforward,inpartbecauseoftheworkalreadydonein
developingtheGeneralPrinciplesonCreditReporting.Theyfollowdirectlyfromthepreceding
discussion.Effectiveclientprotectionmeasuresmustbeconsideredforalloftheserecommendations,
asisfurtherdiscussedintheroadmaponClientProtection.
1. Implement Credit Reporting in Line with the Gene ralPrinciples on Credit Reporting in Every Country (or Regionally )by 2020
PolicymakersandcentralbankersshouldusetheGeneralPrinciplesonCreditReportingto
implementorimprovecreditreportingsystems.Incountrieswithlaggingcreditreportingsystems,
regulatorsandgovernmentofficialsshouldfocusonapplyingbestpracticesforaddressingthecomplexity,timeandextensivecollaborationrequiredbyarangeofactorsforestablishingeffective
creditreporting.
ActionPoint:Conductindependentassessmentstoidentifyhowthelocalcreditreporting
marketcanbeimproved.
ActionPoint:TrackprogressusingthemetricsestablishedbytheWorldBanksTaskForce
onCreditReporting.
ActionPoint:Enlargecomprehensivecredit-reportingcoveragetoincludeBASEOFTHE
PYRAMIDprovidersandtheircustomers.TobroadencredithistorycoverageforBASEOFTHEPYRAMIDcustomers,governmentsshouldincentivizeorrequireallfinancialservices
providers,includingunregulatedinstitutions,toreporttoallcreditregistry,creditbureau,
oranalternativecredit-informationsharingsystems.Todoso,theyshouldcreatean
environmentacrossbothregulatedandunregulatedinstitutionsthatallowsforthecredit
reportingecosystemtodevelop.
IV.Recommendations
ProvidersRegulators
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2. Enable Alternative Data to Be Collected and Shared to Buildthe Financial Histories of Borrowers with Thin Files
Policymakersandprovidersfromdifferentsectors(financialinstitutions,telecommunicationscompanies,utilitycompanies,etc.)shouldcollaboratewheneverpossibleandappropriatetoenable
sharingofalternativedata.Creditreportingserviceprovidersshouldworktoidentifyandservethe
dataanalyticsneedsofalternativedataproviders.
3. Build the Technical Capaci ty of Microfinance Institutions andOther Small or Rural Providers at the Base of the Pyramid toIncorporate Credit Reporting into their OperationsForfinancialinstitutionstousecreditreportingservices,theyneedadequateMISsystemsand
underwritingprocessesthatsmoothlyincorporatedatafromcreditreportingsystems.These
systemchangesareoftencostlyandtimeconsuming,andareanimportantdeterrenttocredit
bureauuse.
ActionPoint:EstablishaUS$50millionglobalfundthatprovidesrepayablegrantstodeploy
specialiststhathelpequipsmallfinancialinstitutionstointerfacesmoothlywithcredit
reportingandintegratereportingintooperatingprocesses.
ActionPoint:Implementcustomizedcreditreportingservicesforgrouploans,andsmall
/frequentloansthatareespeciallydesignedforlow-incomehouseholds.Theseserviceswouldbedesignedaroundthelendingmethodologiesandborrowerrealitiesfoundatthe
baseofthepyramid(e.g.mixedpersonalandbusinessaccounting).
ActionPoint:Workwithcorebankingproviderswhichcatertomicrofinanceinstitutionsto
ensuretheirsystemscanexport/importdatatocreditbureaus.
Providers
ProvidersRegulators
SupportOrganizations
Capacity-BuildingAgenda
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Thisworkingpaperwascreatedthroughaseriesofconsultationswithanexpertsworkinggroupon
CreditReporting.WewishtoexpressourgratitudetotheCreditReportingWorkingGroupmembers
fortheiractiveparticipationingroupdiscussionsandthoughtfulcontributions.
Wealsothankthemanyadditionalexpertswhorevieweddraftsofthepaperandprovidedinput.
Finally,wewishtothankthemanyCFIandAccionstaffmemberswhoprovidedsupportincluding
AllisonBernstein,MereneBotsio,ElizabethDavidson,AnitaGardeva,SonjaKelly,andAmandaLotz.
TheCenterforFinancialInclusionacceptsresponsibilityfortheviewsexpressedinthispaper.Those
viewsdonotnecessarilyreflecttheviewsofindividualworkinggroupmembersortheir
organizations.
ExpertsWorkingGrouponCreditReporting
TonyLythgoe,IFC(Chair)
AnitaGardeva,CenterforFinancialInclusion
(Facilitator)
CeciliaBouras,WesternUnion
CornelioPimentel,Consultant,Brazil
JoachimBartels,BIIA
MichaelTurner,PERC
NeilMunroe,ACCIS
SyedMohsinAhmed,PakistanMicrofinance
Network
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This publication was produced by Financial Inclusion 2020:
1101 15th Street NW, Suite 400, Washington, DC 20005 USA Tel 202.393.5113 Fax 202.393.5115www.centerforfinancialinclusion.org