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Industry calls for joint credit bureau

Plagued by high non-performing loan and debtors books, banks and retailers are pushing for the creation of a credit bureau, businessdigest has established.

Chris Muronzi

This comes as it emerged banks and retailers are concerned by the high levels of non-performing loans and bad debtors.

The banking sector currently uses the Financial Clearing Bureau (FCB), which analysts say only keeps a register of defaulters and judgments.

The same applies in the case of retailers, where Trans Union, formerly Dunn and Bradstreet, keeps a list of defaulters from the retail sector.

Banks are said to be reeling from non-performing loans and are fast-tracking legal processes for recovering bad loans.

NMB Holdings saw its non-performing loans (NPLs) almost doubling to 22,8% of its loan book in the first half of the year, a development management said reflected the stagnation and the liquidity problems facing the economy.

A non-performing loan is a sum of borrowed money upon which the debtor has not made his or her scheduled payments for at least 90 days.

A non-performing loan is either in default or close to being in default. Once a loan is non-performing, the odds that it will be repaid in full are considered to be substantially lower.

But analysts say other banks are “conservatively” providing for non-performing loans.

Worries over non-performing loans recently forced banks to meet retailers, micro finance institutions and other players in the country who provide credit to map out a way forward for the creation of a credit reference bureau which will, among other things, offer credit rating services.

It also emerged the central bank also wants to see the creation of a credit registry in the country given its role in promoting the stability of the financial sector while government is said to be in the process of formulating a regulatory framework for the establishment of a National Credit Reference Bureau.

Other countries such as South Africa have the South African Credit Providers Association, a voluntary organisation composed of industry players.

The members are drawn from different industries with the sole purpose of sharing credit information.

The industry players share information and gain access to other credit- and service providers’ information about common or potential customers.

Banks feel the creation of a credit bureau will help determine creditworthiness of a would-be bank borrower.

Although FCB only keeps a register of defaulters and judgments, it does not keep credit history.

“A credit bureau should keep a customer’s full credit history both good (positive) and negative and also have a credit rating algorithm.
“FCB merely says ABCD defaulted on a Telone bill and they put him/her on a register. But that does not help a bank determine whether ABCD is a creditworthy person or help determine whether he/she is heavily borrowed,” an analyst said.

The operation of the South African association is through a regulatory framework where submissions of information are through agreed communication mediums through standard operating procedures followed by all members and guided by the Constitution.

Banks and retailers agreed there was need for the country to have a Credit Providers Association of Zimbabwe with participants drawn from the Credit Bureau Association of Zimbabwe.

A source at the meeting said there was need to move away from negative data sharing to both positive and negative data sharing as there were some traits which could be beneficial in positive data sharing.

A steering committee was setup to develop the terms of reference of the Credit Providers Association of Zimbabwe.

The committee comprises representatives from Edgars, XDS Credit Bureau, TN, Virl Micro Finance, RBZ and National Credit Bureau.

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