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Zimbabwe has been lagging behind its regional peers such as South Africa, Botswana and Zambia in providing a comprehensive database that helps lenders assess the risk of potential borrowers.
It also enables lenders to make timeous disbursements of credit.
Experts believe that credit bureaux prevent over-indebtedness on the part of borrowers, while providing assurance on the level of development and health of the credit sector for financial service supervisors.
Usually credit bureaux play a pivotal role in most developed financial service markets, as they provide objective information to lenders on the level of indebtedness and payment performance of potential borrowers, allowing institutions to assess between different types of clients and also to differentiate between good and distressed and opportunity-driven borrowers.
Spectip Investments operations director Mr Innocent Mugwagwa said the new entity will enable private and public entities to gain a greater perspective into the risk profiles of individuals and companies, thereby empowering them to make more informed business decisions.
Through the project, network members will be able to access the critical information through an Internet browser, batch requests and direct data connection.
“We collect, collate and disseminate credit-related information from multiple sources, including Government departments, financial institutions, businesses and consumers. This includes the credit history and identification of individual companies registered in the country.
“We use stringent procedures to ensure that the data is relevant, accurate and up-to-date. All our data is managed and processed in a way that ensures the utmost protection and integrity.
“The company has a rich database encompassing individuals and companies in the country, including 5,6 million consumer identification records, payment behaviour information on consumer or borrowers and 35 percent of mortgage data in the country.
“It has established data-sharing agreements with several Government departments to power its information solutions. These Government entities include Messengers of Court, Zimbabwe Republic Police, Department of Economic Development (DED), debt collectors, lawyers and the Real Estate Regulatory Agency,” said Mr Mugwagwa.
He further noted that the formation of the credit bureau is also premised on protecting clients against unnecessary risk exposure by providing access to more complete information about prospective borrowers’ financial status, while at the same time reducing the cost and turnaround time for credit evaluations and decisions.
Market watchers have been warning about the absence of a credit bureau on the local market, especially when loans and advances to individuals and households are increasing relative to other key sectors in the economy.
Brokerage firm MMC Capital Research said in a July 2010 research note that loans to individuals at US$58 million or 6 percent of the total loans — compared to US$23 million, US$18 million and US$14 million for the transport, construction and communication sector respectively — were “precarious for a fragile economy with low incomes such as Zimbabwe”.
Statistics from the Ministry of Finance indicated that loans and advances to households in the period between January and September last year rose to 8 percent of US$1,4 billion extended through loans and advances.
Observed MMC Capital: “In the absence of a national credit bureau, as is the case with Zimbabwe, chances that individual bank loans may be secured against the same pledged assets for other borrowings from other sectors such as retailing ( for example furniture and clothing shops) is very high.
“This situation will expose the banking sector to credit risk as the probability of default and impairment of such loans cannot be ruled out.”
Similarly, Barclays Zimbabwe managing director Mr George Guvamatanga said in a recent statement accompanying the bank’s 2010 annual financial report that there is need to exercise caution, especially at a time when credit is coming through non-bank sources such as micro-finance institutions.
“It is still my opinion that the financial sector needs to take further steps to strengthen the risk management practices through the establishment of a credit bureau and implementation of robust risk management frameworks.
“We have noted the increase in credit coming from non-bank sources. This poses challenges in the market, particularly in the absence of credit bureaux,” explained Mr Guvamatanga.
Due to the illiquid conditions on the market, borrowers have had to rely on many lenders, especially micro-finance institutions, while at the same time pledging the same assets as collateral.
The country has more than 100 micro-finance institutions (MFIs).
Economists believe that a combination of low incomes by borrowers and high interest rates being levied by MFIs is a recipe for a major crisis in the economy.
Progress in the financial services sector was stalled by the decade-old recession, which saw hyper-inflation negatively impacting on most financial institutions.
The multi-currency regime is slowly restoring sanity in the sector.-The Sunday Mail
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