Global Credit Bureau Status Report
Peer Stein Head, Financial Infrastructure & Institution Building International Finance Corporation October 8-10, 2006
Private Credit Bureaus Continue to Grow
70 60 50 40 30 20 10 0 Pre- 1974 1977 1981 1985 1989 1992 1994 1996 1998 2001 2003 2005 1970
OECD Latin America Asia Africa Middle East and North Africa Eastern Europe and Central Asia
Source: Doing Business 2006
Since 2003 Several New Private Credit Bureaus have been Established
• Asia
• India
• Eastern Europe & Central Asia
• Armenia, Bulgaria, Croatia, Georgia, Kazakhstan, Ukraine, Slovakia, Russia
• Latin America
• Nicaragua, Honduras
• Middle East & North Africa
• Saudi Arabia, Egypt (will be operational in 2007)
International Trends in Credit Bureau Development
• High growth of retail credit in emerging markets (62% increase during 1996-2004) • Move towards more responsible lending following various consumer loan crises • Increased awareness of credit reporting (e.g. in Eastern Europe the number of private credit bureaus rose from five to twelve in 2006) • Falling start-up costs for credit bureaus with decreasing costs of database management software • Growing competition
According to Doing Business in 2006, the LAC Region is a Leader in Credit Information-Sharing amongst Emerging Markets
OECD Latin America & Caribbean East Asia & Pacific 9.6 6.6 3.5 1.7 0.6 0 10 20 30 40 50 60 70 31.2 59.0
Average private bureau coverage (% adults)
Europe & Central Asia Sub-Saharan Africa Middle East & North Africa South Asia
6.0 5.0 5.0 4.0 3.0 2.0 1.0 0.0 High Income Latin America Europe & Middle East & East Asia & OECD & Caribbean Central Asia North Africa Pacific South Asia Sub-Saharan Africa 2.5 2.0 1.8 1.8 1.5 4.5
• 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 2006
Ownership of Private Credit Bureaus
Private not owned by banks / FIs / other credit providers Partially government owned
Industry Association / Chamber of Commerce 9% 28% Private owned by banks / FIs / other credit providers
4% 59%
Source: Doing Business 2005
# of PCBs
10 65 43 20 30 40 50 60 70 0 Private Commercial Banks Public Commercial Banks 28 Development Banks Credit Union / Coops Finance Corporations Credit Card Issuers 47 Firms Providing Loans 42 Retail / Merchants 31 Utilities Providers 18 Other Credit Bureaus 6 Microfinance Institutions
Source: Doing Business 2006
33 57 57
Contributors of Data to Private Credit Bureaus
Sources of Information
Laws and Regulations Relevant to Credit Bureaus
Borrower can access list of parties who requested Borrower consent before data released from CB Borrower consent before data submitted to CB Special law for credit bureaus Data Protection law FIs required by law to provide data to bureau FIs required to consult bureau before lending Banking law Central bank regulation Code of Conduct Penalties for distributing erroneous data Borrowers are guaranteed by law to be able to inspect data
0%
10%
20%
30%
40%
50%
60%
70%
80%
% of Countries with Relevant Laws Source: Doing Business 2006
When are Records Erased from the Bureau by a Private Credit Bureau?
Defaults/Cancelled Debts are Erased from the Records
60% 50% 40% 30% 20% 10% 0% Immediately Within 1 year Within 5 years Within 10 years Over 10 years Never Repaid Not repaid
Source: Doing Business 2006
User Access to Bureau Data
Other private firms / agencies 15% 24% 36% Supervised FIs
Banking supervisors 38%
Other nonsupervised FIs
Source: Doing Business 2005
Ensuring Data Access
Methods to Determine Accuracy of Data
45 40 35 30 25 20 15 10 5 0 Routine checks with other data provided by FIs Borrower complaints Statistical checks Software program to identify abnormalities in data Other 7 35 42 38 34
Source: Doing Business 2005
Main Areas of Development for Private Credit Bureaus
Value-added services Expand types of information distributed Improve legal environment Technology upgrades Technology upgrades Quality control Include more data sources Marketing & customer service 5% 5% 5% 10% 10% 17% 17% 32%
0%
5%
10%
15%
20%
25%
30%
35%
Source: Doing Business 2006
Challenges in Developing a Private Credit Bureau for Emerging Markets
• Data quality and role of credit bureaus • Support responsible lending practices • Enact appropriate laws and regulations to support growth of PCBs • Ensure consumer rights and data protection: Educate consumers and protect their rights • Provide for proper supervision and codes of conduct • Change perceptions and build awareness • Build trust • Persuade lenders to share positive information • Ensure commercial viability in smaller countries
Annex
Global Credit Bureau Program
• Number of credit bureaus created and/or significantly improved: 7. In Bosnia and Herzegovina, Romania, Bulgaria, Costa Rica, Nicaragua, Guatemala, Honduras. • Recommendations being implemented in Egypt and Saudi Arabia. • Number of new laws/regulations drafted or contributed to the drafting: 12. • Credit bureau development strategy reports, feasibility studies and in-depth market assessment reports: 14. • Support organization of roundtables, seminars, conferences and other outreach events: 26 events in 21 countries. • Monitoring of credit reporting environment in over 120 countries through Doing Business Report.
Asia
Program Status in Asia
India Philippines Timor Leste Vietnam Assessment of a credit bureau for rural/micro/SME borrowers Development of a private bureau, legal and regulatory framework, outreach/awareness Workshop undertaken to assess potential for development of credit reporting TA underway to establish private credit bureau – including work on legislation and technical scoping study
Latin America & the Caribbean
Program Status in Latin America & the Caribbean
Brazil Bolivia Costa Rica El Salvador Haiti Honduras Mexico Nicaragua Panama Legal framework, outreach; upgrade to positive sharing and new CB regulation Legal framework, market assessment, training; upgrade to full sharing, new CB regulation, risk training/ seminar Legal framework; upgrade to positive sharing and new CB Institutional sharing enhancement; upgrade to positive sharing, new CB Market assessment Legal framework, outreach; upgrade to positive sharing and new CB Market assessment, CB development for small lenders / MFIs Legal framework, CB development; CB opened in 2005 and new CB regulation enforced Legal framework, outreach, value-added services; amendment to CB law, development of bureau scores, and SME CB project definition Financial literacy program, WHCRI; supported program launch in LAC
Overall LAC
Sub-Saharan Africa
Program Status in Sub-Saharan Africa
Ghana Kenya Nigeria South Africa Assistance with legal and regulatory framework Assistance with enabling regulation Assistance with the development of a private sector bureau Assistance with development of microfinance bureau scores. Develop credit reporting services covering previously disenfranchised market segments Assistance with the development of a private sector bureau
Tanzania
Eastern Europe & Central Asia
Program Status in Eastern Europe & Central Asia
Bulgaria Georgia Market assessment, outreach; PCB established in 2004 Outreach, advice on regulatory framework; negative-only bureau in 2005; regulatory issues to be addressed Advice on regulatory framework Market assessment, advice on regulatory framework Market assessment, outreach, advice on regulatory framework, diagnostic/feasibility study; bank-owned bureau established in 2004 Market assessment, outreach, advice on regulatory framework; PCBs established in 2005 Market assessment; outreach, advice on regulatory framework; PCBs established in 2006
Kyrgyz Republic Macedonia Romania
Russia Ukraine
Middle East & North Africa
Program Status in Middle East & North Africa
Algeria Egypt Morocco Pakistan Saudi Arabia Tunisia UAE Diagnostic Assistance to set up a private credit bureau and select a technical partner Diagnostic, assisting central bank in developing private credit reporting infrastructure TA for development of value-added services TA for development of SME bureau Diagnostic Diagnostic
Links & Contact Information
Research Links
• • • • http://www.ifc.org/ifcext/gfm.nsf/Content/FinancialInfrastructure - IFC’s Global Credit Bureau Program http://www.worldbank.org/wbi/banking/creditscoring - Focus on small business by WB/IFC http://econ.worldbank.org/programs/credit_reporting - Comprehensive research by WB http://rru.worldbank.org/doingbusiness - Focus on business environment
Contact information
• • Peer Stein, Head, Pstein@ifc.org Nataliya Mylenko, Program Manager, Nmylenko@ifc.org
Regional Credit Bureau and Risk Management Advisors
• • • Oscar Maddedu, Omaddedu@ifc.org Stefano Stoppani, Sstoppani@ifc.org Tony Lythgoe, Tlythgoe@ifc.org
Credit Bureau Advisors
• • Peter Sheerin, Psheerin@ifc.org Colin Raymond, Craymond@ifc.org