THE 2ND EAST AFRICAN COMMUNITY REGIONAL CREDIT INFORMATION SHARING CONFERENCE Sub Saharan Africa Credit Bureau Program Access to Finance Advisory Services Nairobi, September 2013 Moyo Violet Ndonde & Agata Szydlowska Credit Reporting Trends Introduction – Global Credit Reporting Program Global Trends within Credit Bureau Industry – Recent Developments Africa “Decade of Change” – Impact on credit bureau trends IFC’s Global Credit Bureau Program - Projects Starting from 2005 IFC & World Bank focused on establishing Credit Bureaus worldwide. Why? Latin America & Caribbean Argentina Barbados Chile Guyana Jamaica OECS (**) Trinidad & T Eastern Europe & Central Asia Sub – Saharan Africa Azerbaijan Kyrgyzstan Tajikistan Uzbekistan Mongolia Moldova, Kossovo Cape Verde DRC Ethiopia Ghana Mauritius Mozambique Nigeria Rwanda Senegal Tanzania UEMOA (*) CEMAC (***) (*) Western Africa Economic and Monetary Union - 8 countries (**) Organization of Eastern Caribbean States - 7 countries (***) Central Africa Economic and Monetary Union – 6 countries Middle East & North Africa Afghanistan Algeria Djibouti Egypt Jordan Lebanon Libya Iraq Morocco Oman Palestine Syria Tunisia U.A.E. Yemen Asia & Pacific Bangladesh Cambodia India Lao Nepal Pacific Islands In developing countries, almost 2/3 of the population do not have access to finance Direct Correlation between Lack of PCBs and Low Access to Credit! • Countries without Private Credit Bureau (PCB) are the same ones, where acces to credit is most difficult, limited and bureaucratic! •Afrcica Region remains with the lowest coverage of credit bureaus (lowest access to credit), especially the Sub Saharan Africa Global Trends – International Coverage Expanding Source: Doing Business 2011 Credit Bureau Coverage Across Regions Average Private Bureau Coverage (% of adults) 1. LAC continues to lead, being the second strongest region after OECD in the extent of credit bureau coverage 67.4 OECD 33.8 Latin America & Caribbean 29.8 Europe & Central Asia 19.2 East Asia & Pacific 2. Sub-Saharan 9.3 Middle East & North Africa South Asia 6.4 Africa has the lowest coverage Sub-Saharan Africa 5.6 3. MENA significantly 0 10 20 30 40 50 Percent of Adults Source: Doing Business 2013 60 70 80 improved over the past 8 years What has changed in 8 years? A glance at state of coverage of credit bureaus Average Credit Bureau Coverage (% of adults) 59 OECD 67.4 31.2 33.8 Latin America & Caribbean 6.6 Europe & Central Asia 29.8 9.6 East Asia & Pacific 1.7 Middle East & North Africa 0.6 South Asia 19.2 2005 2013 9.3 6.4 3.5 Sub-Saharan Africa 5.6 0 10 20 30 40 50 60 70 80 Percent of Adults ECA, EAP and MENA are big reformers demonstrating significant leaps in improving the coverage of private credit bureaus Source: Doing Business 2013 Regional Comparisons for Credit Information Index similar to OECD, ECA leads Credit Information Index • ECA is the best performer out of all emerging market regions • MENA is ahead of LAC, which demonstrates the big progress in reforms in MENA region for the past years 6.0 5.0 • 5.0 Credit Information Index(max=6) 5.0 Components of the Credit Information Index EAP and SSA lag significantly behind as the lowest performer in credit information sharing market 4.0 4.0 3.0 3.0 3.0 2.0 2.0 2.0 1.0 0.0 High Income Europe & Latin Middle East South Asia OECD Central Asia America & & North Caribbean Africa Source: Doing Business 2013 East Asia & Sub-Saharan Pacific Africa • 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 What has changed in 8 years? A glance at the state of credit information sharing across regions Credit Information Index: 2005 vs. 2013 6.0 Credit Information Index 5.0 5.0 5.0 5.0 4.5 4.0 4.0 3.0 3.0 3.0 2013 2.5 2.0 2.0 1.8 2.0 1.8 2005 2.0 1.5 1.0 0.0 High Income OECD Europe & Central Latin America & Asia Caribbean Middle East & North Africa South Asia East Asia & Pacific Sub-Saharan Africa Sub – Saharan Africa and East Asia & Pacific have made small progress on improving the credit information index. Europe & Central Asia and MENA are the regions with the biggest progress over the past years. At the same time there is a slight decline rate in LAC region. Source: Doing Business 2013 Global Trends – practical terms Positive & Negative Data Sharing (mandatory) Increase of MFI & SME sector contribution Alternative Data Inclusion in credit reporting ( company registry data, utility companies, mobile phone providers, retailers) Increase Supervision & Governance focus – Responsible Finance approach as a consequence of Global Crisis in Western World. % of CBs receiving information from each source Contributors of Data to Credit Bureaus 100% • Over 50% of bureaus reportedly receive information from MFIs • Data quality and coverage of the MFI market remains an issue, as most bureaus capture only data from regulated MFIs (if any) • More PCBs started to get information from additional sources, like employers, statistic agencies, ID , bankruptcy agencies 91% 90% 83% 80% 75% 72% 67% 70% 61% 60% 50% 50% 50% 51% 45% 43% 40% 30% 30% 29% 19% 20% 12% 10% 0% Private Commercial Banks (105) Public Development Credit Finance Corps Credit Card Commercial Banks (99) Union/Coops (109) Issuers (110) Banks (100) (90) Firms prov loans/Trade Creditors (109) Retailers (106) Utilities Providers (106) Other Credit Microfinance Bureaus (105) Institutions (106) Sources and numbers of CB that provided information Source: Doing Business 2013 : Data based on 114 CBs that provided information Employers (100) Courts (100) Statistical agencies (99) Other (90) Credit Bureaus that collect data from utility providers (in alphabetical order) Argentina Ecuador Panama Armenia Estonia Papua New Guinea Australia Fiji Paraguay Bolivia Germany Peru Bosnia and Herzegovina Guatemala Poland Honduras Botswana Puerto Rico Iceland Bulgaria Rwanda Israel Canada Saudi Arabia Kenya Colombia South Africa Malaysia Costa Rica Swaziland Mexico Cyprus United Kingdom Namibia Denmark Uruguay New Zealand Source: Doing Business 2013 Africa- Decade of Change Democratization Increased Transparency Improved Legal Framework Robust Economic Development Increased FDI flows Deepening of Financial Sector New Financial Services Reaching out to broader clientele Increasing Importance of SME & MFI sectors Credit Reporting Trends in Africa Implementation of credit reporting frameworks to enable sharing of credit information (Ghana, Rwanda, Kenya, Tanzania, UMOA and others) Focus on Private Credit Bureaus rather than public credit registries as a tool to share information Start of sharing positive and negative data e.g. Rwanda, Ghana, Tanzania pilot in Kenya Inclusion of SME and MFI data Focus on capacity building for Supervision of credit reporting South Africa Kenya Zambia Ghana Nigeria Rwanda Namibia Uganda Botswana Mauritius Swaziland Sierra Leone Cameroon Cape Verde Central African Republic Chad Congo, Rep. Equatorial Guinea Ethiopia Gabon Liberia Angola Benin Burkina Faso Côte d'Ivoire Guinea-Bissau Malawi Mali Mozambique Niger Senegal Tanzania Togo Zimbabwe Comoros Guinea Lesotho Gambia, The Burundi Mauritania Seychelles Sudan Congo, Dem. Rep. Eritrea Madagascar São Tomé and Príncipe SSA Country Rankings (DB13) “GETTING CREDIT” COUNTRY RANKINGS (OUT OF 185) Highest performers Countries with most reform potential Source: Doing Business 2013 154 154 154 159 167 167 167 167 176 180 180 180 129 129 129 129 129 129 129 129 129 129 129 129 129 104 104 104 104 104 104 104 104 104 83 40 40 53 53 53 12 12 23 23 23 1 Comoros Congo, Dem. Rep. Eritrea Gambia, The Guinea Lesotho Madagascar Malawi São Tomé and Príncipe Seychelles Sudan Tanzania Zimbabwe Benin Burkina Faso Burundi Côte d'Ivoire Guinea-Bissau Liberia Mali Mauritania Niger Senegal Togo Cameroon Central African Republic Chad Congo, Rep. Equatorial Guinea Gabon Sierra Leone Angola Botswana Ethiopia Kenya Mozambique Namibia Nigeria Cape Verde Ghana Mauritius Swaziland Uganda Zambia Rwanda South Africa SSA Rankings: Depth of Credit Information across countries Depth of credit information index (0-6) 7 6 5 4 3 2 1 0 South Africa and Rwanda are the highest performers, whereas numerous countries have the largest improvement and reform potential Source: Doing Business 2013 Angola Benin Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo, Dem. Rep. Congo, Rep. Côte d'Ivoire Equatorial Guinea Eritrea Ethiopia Gabon Gambia, The Guinea Guinea-Bissau Lesotho Liberia Madagascar Malawi Mali Mauritania Mauritius Mozambique Niger São Tomé and Príncipe Senegal Seychelles Sierra Leone Sudan Tanzania Togo Zimbabwe Uganda Nigeria Kenya Zambia Ghana Rwanda Swaziland South Africa Botswana Namibia SSA Rankings: Private Bureau Coverage still low Credit Bureau coverage (% of adults) 70 60 50 40 30 20 10 0 Lack of private credit reporting infrastructure: zero coverage Source: Doing Business 2012 Agenda Program objective Donors IFC products & Services IFC Role Delivery Model Clients & Stakeholders Portfolio & Pipeline projects Achievements & Challenges Opportunities going forward BCEAO and Ghana case study Program Objective Support IFC clients and stakeholders to develop or improve credit reporting systems – private, public or mixed reporting models. Donors Government of Switzerland Austrian Ministry of Finance Why? Huge financing gap in Sub Saharan Africa Percentage of unmet credit needs (Smaller type refers to the total value of the gap in each region) Central Asia & Eastern Europe $ 322-394 billion 29-36% High-income OECD $1,035-1,265 Bn Middle East & North Africa $323-395 billion 6-8% 308-376% Latin America $558-682 billion 116-142% South Asia $186-228 billion 14-17% 18-22% Sub-Saharan Africa $118-145 billion 338-413% Source: MSME database 2011, McKinsey & Company East Asia $636-777 billion <10 $3.2-3.9 trillion globally 10-29 30-59 >60 Why? Reduce information asymmetries Support efficient credit allocation 23 Strengthen risk management A solid financial infrastructure serves both ACCESS TO FINANCE and FINANCIAL STABILITY IFC Products & Services Technical support for private CRB development – model selection, business planning, sourcing, selection and contracting of technology vendors for CRB deployments, country market assessments. Technical support for Public Credit Registry development – development/review of bidding/RfP documents, independent advisor support during early stages of systems deployment. Legal/Regulatory development – technical input to CR legislation, regulation, Codes of Conduct. IFC Products & Services Development of data elements, Data Input File Formats, Common data formats and business rules. Capacity Building – lenders, regulators, consumer groups – e.g., use of credit bureau data across the account life cycle, data quality, operational aspects, credit bureau supervision. Knowledge Sharing – events, publications & training. IFC Products & Services Technical support to increase participation of nonregulated credit providers: e.g., MFI’s – technical & risk assessments, road map development. Support establishment of national working groups and provide technical support to WGs. IFC Role & Delivery Model Honest broker/independent advisor Global Credit Bureau & Risk Advisors supported by regional and local staff Advisory Service project initiated through a Legal agreement with Client Requirement for client contributions Clients & Stakeholders Central Banks Bankers Associations Credit Bureaus Consumer/MSME Associations Portfolio, Closed & Pipeline Projects Ghana Tanzania Ethiopia Sierra Leone Liberia Burundi WAMU (UEMOA) Zambia, Malawi, Nigeria & SADC (pipeline) Achievements Private Credit Bureaus/Public Credit Registry deployed/improved in Ethiopia, Tanzania & Ghana and currently collect credit information. Market assessments & roadmaps developed for Sierra Leone, Liberia, Burundi, DRC, WAMU. capacity building workshops conducted for lenders in Ghana, Tanzania, Nigeria, Liberia, WAMU, Burundi, Ethiopia. Achievements Credit Reporting legislation/regulation adopted or revised in 11 countries (including WAMU). Common data format adopted in Ghana. Processes and toolkit for credit reporting supervision developed and utilized. Financial literacy material developed and tested. Site and exposure visits facilitated for stakeholders in Ghana, Tanzania, Ethiopia, Sierra Leone. Opportunities Increased interest and momentum for Credit Reporting in SSA. Regional Solutions – WAMU, SADC, CEMAC. Leverage IFC and stakeholder experience. Innovation – develop and adapt models to specific country requirements and needs. Collaboration with other partners – FinMark Trust, KfW etc. Challenges Data quality Suitable CR models in small markets Capacity constraints Impact achieved in the medium to long term SSA Case Studies CLIENT NAME: Bank of Ghana DESCRIPTION: Provision of advisory services to Bank of Ghana for credit reporting development. PRESENTER: Mr William Nyavor Bank of Ghana CLIENT NAME: BCEAO- Central Bank of UMOA DESCRIPTION: Provision of advisory services to establish regional private credit bureau PRESENTER: Mr Symphorien Agbessadji BCEAO Thank you 35