RBZ commends plans to establish Credit Reference Bureau

Policy Statement last week.
Calls for establishment of a Credit Reference Bureau come in the wake of rising credit facilities in the country since dollarisation. But low economic activity, low disposable incomes, sub-optimal company performance and liquidity constraints have affected both corporate and individuals capacity to repay debts.
High utility and service charges against low household incomes have also conspired to constrain debtors’ payment capacity.
“As the monetary authorities, we once again reiterate calls for all relevant key players to set up a credit reference bureau. As part of ongoing efforts to promote transparency and enhance market discipline, the Reserve Bank, with immediate effect, shall publish, on its website, on a quarterly basis, the performance of each banking institution,” said Dr Gono.
The Reserve Bank of Zimbabwe in 2010 supported bankers’ calls for the setting up of a Credit Reference Bureau, but asked industry players to “consider funding” its establishment for the benefit of the industry and economy in general.
The RBZ said that establishment of a Credit Reference Bureau would provide a central database for credit information sharing which will, among other things, augment credit risk management, and provide the requisite support infrastructure for the implementation of Basel II by banks. Basel II is the second accord of the Basel Committee on Bank Supervision, which came into effect on January 1 2012 in Zimbabwe. It lays out the standards and regulations requiring the minimum amount of capital that banking institutions must maintain as buffer against deposits in the event that a bank fails.
The main thrust of Credit Reference Bureau is to build a data bank of credit worth individuals and firms in the country. The bureau would provide lending institutions with important information on individuals and firms to facilitate access to credit while speeding up credit applications and approval processes.
While mostly banks use the credit risk data, it would also benefit other lending firms to have access to credit information in order to make informed risk management decisions. While there is growing need for the establishment of a Credit Reference Bureau it has taken long for the initiative to see the light of day. This is because apart from increasing corporate indebtedness, growing use of credit cards has increased consumers’ debts.
There have been reports banks have had to roll over maturing loans to avoid defaults and keep them as performing.