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Use of credit bureau services surge • More financial institutions access information

By: Ama Amankwah Baafi
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There was a surge in the use of credit bureau services in the country in 2017, as a total of 2,222,311 enquiries were made by financial institutions.

This represents a 34 per cent increase from the 1,662,740 enquiries made in 2016 attributable to the general low level of economic activity in Ghana in the year 2016.

The Credit Referencing Activity Annual Report, 2017, by the Financial Stability Department of the Bank of Ghana (BoG), stated that the increased number of participating institutions and continuous sensitisation of financial institutions contributed to the increase in usage in the year under review.

The report presents the performance, key developments and trends in credit referencing system in Ghana.

Section 24 of the Credit Reporting Act (CRA) 2007 (Act 726) requires financial institutions to submit data on borrowers to credit reference bureaux within 72 hours of entering into the credit agreement and update the status of the l

This requirement mandates all financial institutions to engage credit bureaux monthly and conduct credit searches as and when required.

The report shows that the universal banks actively participated in the credit referencing system in 2017 by submitting data and conducting credit searches. A total of 17 banks representing 53 per cent submitted data consistently to all credit bureaux  monthly in the year 2017.

The year under review recorded an increase in participation from the Microfinance Institutions (MFIs) when a total of 65 MFIs submitted data and conducted credit searches compared to 36 institutions in 2016. This figure is anticipated to increase following the ongoing training and sensitisation in credit referencing by BoG for MFIs.

The CRA also mandates credit providers to conduct credit searches on all prospective borrowers prior to granting or refusing a loan application, all aimed at ensuring that bad borrowers who hitherto would secure credit facilities would easily be identified and in addition prevent over indebtedness.

According to the report most financial institutions have incorporated credit searches in their credit appraisal processes, and that out of the total enquiries conducted by financial institutions, 94.6 per cent produced information on persons in the credit bureaux database.

The information obtained from the enquiries included credit information, identity information and guarantor information.

Also, data submissions by Specialized Deposit-Taking Institutions (SDIs) have improved over the years, although some non-compliance was recorded among Non-Bank Financial Institutions (NBFIs) over the years.

Last year, 26 per cent of total NBFIs did not submit data to credit bureaux.

Data submission by the rural and community banks have also seen significant improvement with over 100 banks submitting data for at least six months in 2017. Thirty-six rural banks submitted data consistently to credit bureaux, while 40 of them, representing 28 per cent of the total number of rural banks, did not submit any data to credit bureaux in 2017.

Credit Bureaux
The three credit bureaux are: XDS Data Ghana, Hudson Price Data Solutions Limited and Dun & Bradstreet Credit Bureau Limited.

Some of the existing products and services provided by these bureaux are: Consumer Basic Trace Report (contains information on personal details, credit account summary, address history, guarantor details and telephone history); Quick Loan Check (an online (real-time) application designed to detect and protect against financial loss to lenders); and Consumer Credit Report (contains credit profile overview, credit profile summary, credit facility details and demographic information)

Credit Bureaux
The three credit bureaux are: XDS Data Ghana, Hudson Price Data Solutions Limited and Dun & Bradstreet Credit Bureau Limited.

Some of the existing products and services provided by these bureaux are: Consumer Basic Trace Report (contains information on personal details, credit account summary, address history, guarantor details and telephone history); Quick Loan Check (an online (real-time) application designed to detect and protect against financial loss to lenders); and Consumer Credit Report (contains credit profile overview, credit profile summary, credit facility details and demographic information)

Challenges
Poor quality of data remains a challenge for the effective operation of the credit bureaux. Notable ones include the lack of critical demographic information such as identity information, incorrect or lack of date of birth and residential addresses of borrowers; critical financial information such as outstanding balance, transaction dates, incorrect facility status, etc.

The report attributed some of the above to non-compliance with Know Your Customer (KYC) procedures and lack of review or monitoring of data before submission to credit bureaux.

Again, challenges with inconsistent submission of data was recorded as majority of the complaints / disputes received resulted from the failure of financial institutions to regularly update customers’ credit records with the credit bureaux.

The anomaly was observed in all sub-sectors and resulted in several customers being wrongly denied credit facilities.

Key Developments
Meanwhile, the BoG has completed the development of the portal which is to enable financial institutions to submit same data to all credit bureaux at the same time or period.

The portal is also expected to eliminate challenges such as the difficulty in connecting to the credit bureau platform with different interfaces, passwords and protocols for data submission and inconsistent and multiple error logs received from credit bureaux. –GB