Credit Information Sharing (CIS)

Creditinfo A proven world class Credit Bureau operator

Shane Moldenhauer

Head of Business Development – East Africa

July 2014, Nairobi.

Question

How many of you know what a

Credit Bureau is and what it

does?

How many of you think a Credit

Bureau can benefit you and your

business in a positive way?

Agenda

• Introduction to Creditinfo

• Credit Bureau explained

• Creditinfo’s Credit Bureau Solution

Let’s have a conversation

Not a broadcast presentation

Agenda




About Creditinfo

• We provide credit information and credit risk management solutions and tools.

• Creditinfo Group hf. established 1997 in Iceland

• Currently operating 19 subsidiaries /affiliates in 16 countries, approx. 250 employees

• Creditinfo Kenya established in 2014

• Endorsed by and have long term relationships with internationally recognized authorities & organizations

• World Bank • International Financial Corporation (IFC)• Central Banks & Banking Associations in different countries

Starting Credit Bureau Operations from a Zero Base

• dealing with different rules and

regulations, different cultures and mentalities

• different data structures and data quality, different IT infrastructures

• different data protection/credit bureau laws

Agenda




A common problem

Finance is a barrier to growth

for many

businesses worldwide.

What is the issue?

• Lenders need to have reliable information to make lending decisions

• Consumers and businesses need to be able to give evidence to the lenders to prove their reliability

• Regulators need to be able to monitor risk with lenders and within the marketplace

The Solution

A Credit Bureau

What is a Credit Bureau?

A few definitions:

• Sometimes called a credit reference agency, credit information company or credit registry

• A firm that maintains consumer credit data files and provides credit information to authorised users

• An agency that collects individual credit information and provides it to creditors so they can make a decision on granting loans. Typical clients include banks, mortgage lenders, credit card companies and other financing organisations.

Credit Bureau – The Concept

Would you lend a stranger…?

10,000 Kenyan Shilling

100,000 KES

1,000,000 KES

What questions would you ask?

Before YOU lend any of YOUR own money to

someone….

What information would you want to know?

What questions would YOU ask?

Let’s have a conversation

Not a broadcast presentation

What questions would you ask?

Before YOU lend any of YOUR own money to

someone….

What information would you want to know?

What questions would YOU ask?

Possible Questions

• Do I know them?

• Can I trust them? To do what?• Can I trust them to repay me• What terms have been agreed or do you want?• Is repayment “just whenever” possible?• Will they use the money wisely? What is wisely?

• If something happens to them…..• Where do I stand?• How do you get my money back?

• Am I being reimbursed for the risk?

A Credit Provider Asks Similar QuestionsWe may want to frame the questions in the following manner …..

Can I use data to identify the potential customer to ensure they are who they say they are?

Has the potential customer got a history of good payment performance, showing responsible attitude to credit commitments?

Does the potential customer have a high current state of indebtedness, and have they historically paid the amount that they would need to in the future?

Has the customer being shopping at many places for loans and potentially be declined by other lenders?

Has the potential customer got a history of unpaid loans?

Where does a Credit Bureau get the data from?

Example Sources:• Banks • Credit Card issuers• Loan agencies / Finance houses• Telecommunication companies – mobile phone, landline,

internet providers, tv suppliers• Utility Companies – electricity, gas, water• Insurance companies• Debt collection agencies / Debt Purchase agencies• Public court records• Rental Agreements• Retail credit, home & online shopping - Travel,

Entertainment, Department store cards• Direct from the consumer – from you!

Data Sharing Concept of a Credit Bureau

Originators of the Data are the Credit Grantors & Official Sources

MFIs, Retailers, Telcos

Courts etc

Simplified Credit Report

Name and AddressID NumberCustomer Status

Customer Details

Bad Debt – Overdraft 65655Default Date 04-05-09Amount $1,000

Negative Details

Loan 11122Date – Open 17-11-09 – Closed --------Loan Amount $1,000

Basic Positive Details

Loan 34566Opened Date 17-11-09Loan Amount $1,000Current Balance $ 475Monthly Repayment $ 45Payment History 01000032100000Collateral - None

Full Positive Details

Credit Bureau consolidates and

manages the information

CREDIT BUREAU

Banks

What is a Credit Score / Credit Report?

It is the starting point of

a pre-approval for credit.

• A number generated by mathematical formulas and statistical models which helps the lender determine if you are a good risk.

• The higher your score, the lower the risk you are to lenders.

• Your financial CV

• A snapshot of your credit risk picture at a particular point in time.

• A predictor of your future payment performance based on prior experience

Sample Credit Report

Company Details

Company Summary


Risk Indicator


Court / Direct

Information


Company

Ownership

• Director Involvements


Capital

Company Involvements


Annual Financial

Statements


Recent Enquiries

Who can see your Credit Report?

• Any creditor or lender to whom you have applied for credit

• A mortgage lender, when you apply for a home loan

• A property management firm, when you apply to rent

• A prospective or current employer on a need to know basis

• An insurance company, when you apply for insurance

• A mobile phone company when requesting a phone contract

• Anyone you have given permission to

• Anyone with a legitimate reason to know

• YOU!

How does this help you?

• Provides you with more credit options

• Reduces the cost of credit

• Reduces the need for physical collateral

• Allows for faster decision taking

• Prevents over indebtedness

• Prevents ID fraud

Benefits of a Credit Bureau Score and Report for you

• Improved access to credit • more options for more people

• Better terms and reduced interest rates of borrowing

• Reduce the need for physical collateral

• Pre-approval to credit rather than instantly refused

• Quicker decisions

• Reduces the risk of over indebtedness

• Reduces the risk of fraud, ID theft and money laundering

• Enables customer to effectively check the information used by lenders and challenge decisions

• A fairer way of assessing your access to credit

A financial footprint enables

lenders to determine whether

to provide credit terms and at

what rates.

Benefits for the Lender

• Using shared data to check data accuracy and supplement missing information

• Can offer better terms and rates

• Can offer credit terms to more people where as before they may have instantly declined individuals and businesses

• Alerts them if a customer is getting into difficulty i.e. someone may stop paying another lender

Benefits – the bigger picture

Credit Bureaus can:

• Drive steadier financial market development

• Improve economic stability

• Create greater opportunity for economic growth

• Create greater productivity

• Increase repayment rates, less defaults

• Reduce in interest rates

• Enable tracking and monitoring of economic activity at a macro and geographic level and of financial service providers

• Promote responsible lending

• Improve economic country scores from organisations such as Standard & Poor, Moody’s and Fitch

The Evidence from the beginning

Small firms benefit

from

credit bureaus

Estimates based on data on 5000 firms in 51 countries

Source: Love & Mylenko (2003).

49%

27%

Without credit bureau

With credit bureau

% of Small Firms Reporting High Financing Constraints

28%

40%

Probability of Obtaining a Bank Loan for aSmall Firm

Without credit bureau

With credit bureau

What do we do?

Our focus is on complete solutions in credit risk management:

Providing scoring, decision engines, pricing modules, etc.

Fraud prevention tools, work flow collection software & other credit tools

Consulting on credit processes, risk management, seminars and training

Creditinfo has developed.....

• A modern software solution, which covers requirements for a full-file, non-fragmented, private credit reporting system for sharing positive and negative information among different types of financial and non-financial institutions

• A strong partnership with local credit providers; banks, MFIs, loan companies; telcoms; utility companies; insurance companies; etc

Why Creditinfo’s Credit Bureau Solution works

• Proven implementation

• Consistent and accurate data from various approved and confirmed sources• Regulation, Monitoring, Audits and Control

• Flexible, transparent and easy to understand reports

• Can cover all data subjects, creating financial inclusion

• Includes both traditional and alternative data • ALL relevant data • Includes positive and negative data

• Collaborative approach to build processes and systems for data sharing

What should you do to improve your access to finance?

• Take control of your financial footprint

• Take an active role in managing your credit

• Review the things that effect your credit score

• Review your credit report regularly

(annually / bi-annually)

Creditinfo Credit Bureau

DEMO

Summary – What is a Credit Bureau

An organisation which collects

and maintains credit

information on individuals and

businesses and allows lenders

to access that data to make

informed credit lending

decisions

SUMMARY:What does a Credit Bureau do?

Provides a credit score / report

which tells a lender the risk factor

for that client so the lender can

determine whether to accept a

client or not and the rate the client

qualifies for.

Questions and Answers

Create your financial footprint

• https://www.surveymonkey.com/s/createmyfootprint

• This data will be upload at a later date into the Credit Bureau system

• We will contact those who have provided data.

https://www.surveymonkey.com/s/createmyfootprint

https://www.surveymonkey.com/s/createmyfootprint

For clarification or further information please contact us

Shane MoldenhauerHead of Business Development East Africa

Tel: +254 701 057 702E-mail: [email protected]: shane.molden

Websites and Social Mediawww.creditinfo.com www.creditinformation.com www.creditinfosolutions.com Company Linked In page : www.linkedin.com/company/creditinfo-group

Company Facebook page: www.facebook.com/creditinfo.group

Company Twitter page: www.twitter.com/CreditinfoGroup

Credit Information Sharing (CIS)

Technology

Transcript of Credit Information Sharing (CIS)