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More financial institutions access credit reference bureau - Report

By: Ama Amankwah Baafi
Dr Ernest Addison, Governor, BoG
Dr Ernest Addison, Governor, BoG

Uptake of credit referencing activities increased, with 24 banks submitting data consistently to all credit bureaus in 2018.

This is compared with 17 banks that did same in 2017, the Credit Referencing Activity Annual report 2018 has stated.

It said participation from microfinance institutions (MFIs) also improved, with a total of 66 of them submitting data to credit bureaus.

The report, however, noted that most were not consistent with data submission because only 23 submitted data in all months in the year under review.

It noted that strengthening the credit referencing system was part of the strategies by the Bank of Ghana (BoG) to reduce the high Non-Performing Loans (NPLs) in the banking sector.

Need for bureaus
The report said achieving a robust credit market would require constant assessment of the credit worthiness of borrowers through the use of effective credit infrastructure such as the credit referencing system.

Therefore, as key stakeholders in the credit referencing system, credit reference bureaus (CRB) have provided financial institutions with tools such as credit reports, scores, client tracing, anti-fraud, among other things, to support their lending business and essentially reduce credit risk.

The Credit Reporting Act, 2007 (ACT 726) was enacted in Ghana to provide a framework for credit reporting and other related matters. The Act empowers the Bank of Ghana to have overall supervisory and regulatory authority in all matters relating to credit reporting.

The credit reporting system has, therefore, been operational in Ghana from the year 2008 after the licensing of the first credit reference bureau.

Among other things, the regulations make provision for data submission rules, data protection and quality rules, credit bureau corporate governance requirements, dispute resolutions and sanctions for non-compliance.

The draft regulations also provide for additional sources of data for the credit bureaus and include utility companies, telecommunication companies, retailers, Student Loan Trust, etc.

The regulations are anticipated to be promulgated by the end of the third quarter of 2019.

Other findings
According to the report, data submission by Rural Community Banks (RCBs) continues to improve though at a slower rate than expected. It said 26 of them submitted data consistently months last year.

It said some were non-compliant, with 16 RCBs not submitting data to any credit bureau.

Also, Specialised Deposit-Taking Institutions (SDIs) and other institutions continued to improve upon data submission, with 17 institutions consistently submitting data in all months in 2018.

Revocation of banking licences
The report revealed that the credit reporting system was affected adversely by the revocations of the licences of some banks as a result of severe capital impairment, poor corporate governance systems and other irregularities identified.

The credit reporting system saw an increased customer complaints, poor data quality and reductions in the number of enquiries, as well as credit bureau revenue.

The credit referencing system served as a tool that enabled receivers of resolved banks that is, KPMG and PriceWaterCoopers (PWC), to increase their loan recovery rate.

A number of loan customers of the respective collapsed banks were denied credit facilities by other banks as a result of their indebtedness to those banks as presented on their credit reports.

This compelled some affected customers to settle their previous indebtedness to the receivers. The Bank of Ghana also engaged PWC and KPMG in the submission of data relating to customers of the defunct banks to the credit bureaus.

The report emphasised that in order to address the challenges and improve credit information sharing, the BoG shall continue to strengthen its surveillance on financial institutions and credit bureaus.

“The Bank of Ghana shall engage in public education with stakeholders to ensure that consumers and financial institutions are fully aware of their rights and responsibilities under the Credit Reporting Act,” it said.