Credit reference bureaus seek to include data from utility firms
What you need to know:
Kenya is seeking to extend its coverage of credit information sharing to Sacco borrowers and users of utilities such as water and electricity.
However, efforts to collect information on consumers of utility services are hampered by the unreliability of data held by power, water, and telecommunications companies.
If successful, persons who default on paying their water bills, electricity bills and telephone bills will be denied access to loans from banks, Saccos and microfinance institutions.
Kenya's credit reference bureaus are looking for a consultant to assess the quality and reliability of consumer data stored by utility companies as they seek avenues to blacklist defaulters on water, electricity and telephone bill payments.
The country is seeking to extend its coverage of credit information sharing beyond commercial banks, deposit-taking microfinance institutions and the Higher Education Loans Board to borrowers from savings and credit co-operative societies (Saccos) and users of utilities such as water and electricity.
However, efforts to collect information on consumers of utility services are hampered by the unreliability of data held by power, water, and telecommunications companies.
As a result, credit bureaus are working together with the Credit Information Sharing Association of Kenya to look for ways to incorporate utility companies in the credit information sharing system.
“We need a consultant to review the status of the data that is being held by these utility companies in order to determine their quality and authenticity. At the moment, we are hesitant because of the many errors in the data,” Metropol Credit Reference Bureau managing director Sam Omukoko told The EastAfrican.
If successful, persons who default on paying their water bills, electricity bills and telephone bills will be denied access to loans from banks, Saccos and microfinance institutions.
Control bad debts
Kenya introduced the sharing of credit information on borrowers to help banks control the increasing number of bad debts that led to the collapse of several lenders during the 1980s and 90s.
The country introduced CRBs following concerted consultations between the Central Bank and commercial banks in 2009.
This followed the Banking (Credit Reference Bureau) Regulations, 2008, which became operational on February 2, 2009.
Since then, Kenya, has licensed three bureaus (CRB Africa, Metropol CRB Ltd and Creditinfo) while Tanzania has two registered bureaus, which are privately owned companies (Dun & Bradstreet Credit Bureau Tanzania Ltd and Creditinfo Tanzania).
Rwanda has registered one bureau — CRBAfrica Rwanda— while Uganda has two (Compuscan Uganda and Metropol East Africa Ltd).
However, the regulators still face the challenge of integrating the regulations governing credit information sharing to discourage the movement of high-risk borrowers across the borders.
CRBs in each of the four countries are at different stages of development in terms of data providers and the nature of information to be shared.
The implementation of credit information sharing across the region is being pursued by the Monetary Affairs Committee of the EAC as part of the harmonisation of regional supervisory frameworks.
Kenya, Rwanda, Uganda and Tanzania all have private CRBs, while in 2012 Burundi established a government-owned bureau that was financed by the International Finance Corporation.
While Kenya is working towards full sharing of both positive and negative credit information on borrowers, Rwanda went straight into full-fledged reporting of positive and negative information.
In Uganda, the Financial Institutions (Credit Reference Bureaus) Regulations, 2005 only allows banks and deposit-taking microfinance institutions to participate in credit information sharing.
In Tanzania, the law allows CRBs to collect information from banks and other financial institutions licensed by the central bank. Other sources of credit information include utility providers, telephone companies, external debt collection agencies, public institutions such as the registrar of companies and the courts.
