It’s all about partnerships NewsDay Friday July 24 2015 19 W ELCOME to the Credit Protection Supplement, the first in a series of the- matically-driven and informative monthly publications brought to you courtesy of the smart part- nership between NewsDay, a pub- lication of Alpha Media Hold- ings (AMH) and the Monthly Fi- nancial Sector Bulletin (MFSB). The MFSB is an independent provider of proprietary data, business in- telligence and analyti- cal content supporting decision- making in the finan- cial and re- lated mar- kets. The MFSB’s aim is to en- hance the decision- making pro- cesses of its targeted audiences by aggregat- ing and distributing relevant con- tent for their convenience, an idea which NewsDay shares. Through this partnership, NewsDay will fulfil its commer- cial ends while providing mean- ingful financial sector informa- tion. The idea is to produce sup- plements that meet advertisers’ genuine brand building needs while also catering for the infor- mation needs of the financial sec- tor’s diverse stakeholders. Content for the monthly sup- plements will include (but not be limited to) advertising material on financial (banking, insurance and microfinance) products, ana- lytical pieces, historical industry data otherwise scattered in differ- ent sources, interviews with, as well as guest articles written by industry professionals where nec- essary. It’s not just about making mon- ey off advertisements; it’s also about taking responsibility for improving financial literacy in the country’s markets. We intend for the supplements to be sources of reference now and in future, in addition to being launch pads for financial sector brands’ valuable products. The distribution model for the supplements recognises the on- going shift in the consumption of media products by increasing- ly tech-savvy and well-clued au- diences — that is why in addition to being available as pullout sup- plements in the print edition of NewsDay, the supplements will be downloadable on NewsDay’s website and also be distributed to proprietary mailing lists of the MFSB. This means the supplements can be easily shared which no doubt increases their reach local- ly and internationally. We emphasise on partnerships because the credit protection in- dustry itself is dependent on an elaborate network of partnerships in which financial sector players (credit providers) will feed cred- it information into the custodian- ship of the Reserve Bank of Zim- babwe’s National Credit Registry, which will then sell the informa- tion to Credit Bureaus accredit- ed to the Reserve Bank of Zimba- bwe for further processing and synthesis with information from other sources in order to service the evolving information needs of credit grantors — creating a vir- tuous cycle of credit risk man- agement. Lastly, the partnership between NewsDay and SoundGarden Pub- lishing — the publishers of the MFSB — which brings you this supplement is also important in that it demonstrates the scal- ing up of a relationship between a long-standing columnist and a newspaper title into a mutually beneficial and empowering busi- ness partnership. Omen N Muza, the editor of the MFSB who is working with News- Day as a technical resource per- son for this project, has been con- tributing the weekly Financial Sector Spotlight Column to News- Day since the paper’s inception in mid-2010. G-analytiX ratings, credit scores and financial identities are providing the essential building blocks and tools required to assist the Zim Asset plan achieve its Vision and execute its Mission. 2.3 million individuals and 145 thousand SMEs that already have an FCB track record 1.5 million entities operating in the agri- cultural value chain, including; small-scale farmers, agro-dealers, traders, off-takers, etc. 1.2 million individual business owners and 250 thousand SMEs that are currently outside the formal financial services system Goodrich Analytix (Pvt) Ltd www.g-analytix.com [email protected]Tel.: +263 77 904 3180 THE Monthly Financial Sector Bulletin (MFSB) has compiled these quotable quotes on the subject of Credit Refer- ence Bureaus, attributable to financial analysts, regulators, industry players and economic analysts — most of them opinion leaders in their own right. Apart from revealing popular thinking on the subject dating as far back as the onset of dollarisation, these nuggets also high- light the pros and cons of Credit Refer- ence Bureaus (CRBs). They establish the imperative for this important institu- tional infrastructure and its benefits. Limiting abuse of pledged assets “In the absence of a national credit bureau, as is the case with Zimbabwe, chances that individual bank loans may be secured against the same pledged assets for other borrowings from oth- er sectors such as retailing (for exam- ple furniture and clothing shops) is very high. The situation will expose the bank- ing sector to credit risk as the probabil- ity of default and impairment of such loans cannot be ruled out,” — Brokerage Firm MMC Capital, March 2011 “We recognise that the absence of a credit bureau has created informa- tion asymmetry which is being exploit- ed by borrowers who commit against the same cash flows from different banks. This is resulting in the disount- ed cash flows of the said borrowers not being able to service debts. We esti- mate that most firms and individuals in the market could be over borrowed and this may be contributing to the cur- rent state of acute debt overhang and cases of unsustainable levels of default in the banking sector.” — The then BAZ President George Guvamatanga, June 2012 Establishing borrowers’ true cred- itworthiness “What the economy is in need of is a centralised credit bureau system which would help lenders establish the true creditworthiness of potential borrow- ers. This will ensure that individuals only borrow to levels their salaries can ac- commodate. Again, it will remove the existing loophole, whereby a single payslip is capable of securing multiple loans. A centralised credit bureau would also single out individuals with a poor credit repayment history” — Kumbirai Makwembere, March 2012. “One of the main challenges in the early stages of a business is access to credit, as many new and prospective business owners simply do not have suf- ficient credit record to verify their cred- itworthiness. Government is therefore engaging financial institutions with a view to establish a Credit Reference Bu- reau, whose objective is to build a data bank of creditworthiness of individu- als and firms.” — former Finance Minister Tendai Biti presenting the 2013 National Budget, November 2012 “Absence of the CRB results in infor- mation asymmetry in the financial ser- vices sector as it is difficult to evaluate creditworthiness of borrowers.” — DPC Chief Executive Officer John Chikura at the Chief Financial Officer Winter School in Nyanga, June 2015. Strengthening Risk Management Practices “It is still my opinion that the finan- cial sector needs to take further steps to strengthen the risk management prac- tices through the re-establishment of a credit bureau and implementation In their own words Stakeholders view on importance of credit reference system TO PAGE 22 Reserve Bank of Zimbabwe “credit protection” MONTHLY FINANCIAL SECTOR BULLETIN
Transcript
It’s all about partnerships
NewsDay Friday July 24 2015 19
WELCOME to the Credit Protection Supplement, the first in a series of the-
matically-driven and informative monthly publications brought to you courtesy of the smart part-nership between NewsDay, a pub-lication of Alpha Media Hold-ings (AMH) and the Monthly Fi-nancial Sector Bulletin (MFSB). The MFSB is an independent provider of proprietary data,
business in-telligence and analyti-cal content supporting decision-making in the finan-cial and re-lated mar-kets.
The MFSB’s aim is to en-hance the decision-making pro-cesses of its
targeted audiences by aggregat-ing and distributing relevant con-tent for their convenience, an idea which NewsDay shares.
Through this partnership, NewsDay will fulfil its commer-cial ends while providing mean-ingful financial sector informa-tion. The idea is to produce sup-plements that meet advertisers’ genuine brand building needs while also catering for the infor-mation needs of the financial sec-tor’s diverse stakeholders.
Content for the monthly sup-plements will include (but not be limited to) advertising material on financial (banking, insurance and microfinance) products, ana-lytical pieces, historical industry data otherwise scattered in differ-ent sources, interviews with, as well as guest articles written by industry professionals where nec-essary.
It’s not just about making mon-ey off advertisements; it’s also about taking responsibility for improving financial literacy in the country’s markets. We intend
for the supplements to be sources of reference now and in future, in addition to being launch pads for financial sector brands’ valuable products.
The distribution model for the supplements recognises the on-going shift in the consumption of media products by increasing-ly tech-savvy and well-clued au-diences — that is why in addition to being available as pullout sup-plements in the print edition of NewsDay, the supplements will be downloadable on NewsDay’s website and also be distributed to proprietary mailing lists of the MFSB.
This means the supplements can be easily shared which no doubt increases their reach local-ly and internationally.
We emphasise on partnerships because the credit protection in-dustry itself is dependent on an elaborate network of partnerships in which financial sector players (credit providers) will feed cred-it information into the custodian-ship of the Reserve Bank of Zim-
babwe’s National Credit Registry, which will then sell the informa-tion to Credit Bureaus accredit-ed to the Reserve Bank of Zimba-bwe for further processing and synthesis with information from other sources in order to service the evolving information needs of credit grantors — creating a vir-tuous cycle of credit risk man-agement.
Lastly, the partnership between NewsDay and SoundGarden Pub-lishing — the publishers of the MFSB — which brings you this supplement is also important in that it demonstrates the scal-ing up of a relationship between a long-standing columnist and a newspaper title into a mutually beneficial and empowering busi-ness partnership.
Omen N Muza, the editor of the MFSB who is working with News-Day as a technical resource per-son for this project, has been con-tributing the weekly Financial Sector Spotlight Column to News-Day since the paper’s inception in mid-2010.
G-analytiX ratings, credit scores and financial identities are providing the essential building blocks and tools required to assist the Zim Asset plan achieve its Vision and execute its Mission. 2.3 million individuals and 145
thousand SMEs that already have an FCB track record
1.5 million entities operating in the agri-cultural value chain, including; small-scale farmers, agro-dealers, traders, off-takers, etc.
1.2 million individual business owners and 250 thousand SMEs that are currently outside the formal financial services system
and financial are providing the essential building
THE Monthly Financial Sector Bulletin (MFSB) has compiled these quotable quotes on the subject of Credit Refer-ence Bureaus, attributable to � nancial analysts, regulators, industry players and economic analysts — most of them opinion leaders in their own right. Apart from revealing popular thinking on the subject dating as far back as the onset of dollarisation, these nuggets also high-light the pros and cons of Credit Refer-ence Bureaus (CRBs). They establish the imperative for this important institu-tional infrastructure and its bene� ts.
Limiting abuse of pledged assets“In the absence of a national credit
bureau, as is the case with Zimbabwe, chances that individual bank loans may be secured against the same pledged assets for other borrowings from oth-er sectors such as retailing (for exam-ple furniture and clothing shops) is very high. The situation will expose the bank-ing sector to credit risk as the probabil-ity of default and impairment of such loans cannot be ruled out,” — Brokerage Firm MMC Capital, March 2011
“We recognise that the absence of a credit bureau has created informa-tion asymmetry which is being exploit-ed by borrowers who commit against the same cash � ows from di� erent banks. This is resulting in the disount-ed cash � ows of the said borrowers not being able to service debts. We esti-mate that most � rms and individuals in the market could be over borrowed and this may be contributing to the cur-rent state of acute debt overhang and cases of unsustainable levels of default in the banking sector.” — The then BAZ President George Guvamatanga, June 2012
Establishing borrowers’ true cred-itworthiness
“What the economy is in need of is a centralised credit bureau system which would help lenders establish the true creditworthiness of potential borrow-ers. This will ensure that individuals only borrow to levels their salaries can ac-commodate. Again, it will remove the existing loophole, whereby a single payslip is capable of securing multiple loans. A centralised credit bureau would also single out individuals with a poor credit repayment history” — Kumbirai Makwembere, March 2012.
“One of the main challenges in the early stages of a business is access to credit, as many new and prospective business owners simply do not have suf-� cient credit record to verify their cred-itworthiness. Government is therefore engaging � nancial institutions with a view to establish a Credit Reference Bu-reau, whose objective is to build a data bank of creditworthiness of individu-als and � rms.” — former Finance Minister Tendai Biti presenting the 2013 National Budget, November 2012
“Absence of the CRB results in infor-mation asymmetry in the � nancial ser-vices sector as it is di� cult to evaluate creditworthiness of borrowers.” — DPC Chief Executive O� cer John Chikura at the Chief Financial O� cer Winter School in Nyanga, June 2015.
Strengthening Risk Management Practices
“It is still my opinion that the � nan-cial sector needs to take further steps to strengthen the risk management prac-tices through the re-establishment of a credit bureau and implementation
It’s all about partnershipsWELCOME to the Credit
Protection Supplement, the first in a series of the-
matically-driven and informative monthly publications brought to you courtesy of the smart part-nership between NewsDay,lication of Alpha Media Hold-ings (AMH) and the nancial Sector Bulletin (MFSB). The MFSB is an independent provider of proprietary data,
In their own wordsStakeholders view on importance of credit reference system
TO PAGE 22
Reserve Bank of Zimbabwe
“credit protection”
MONTHLY FINANCIAL SECTOR BULLETIN
Economic empowerment through value chain management
Credit Protection Supplement20 NewsDay Friday July 24 2015
Agriculture is the back-bone of Zimbabwe’s econ-omy inasmuch as Zim-
babweans remain largely a ru-ral people who derive their liveli-hood from agriculture and other related rural economic activities. it provides employment and in-come for 60%-70% of the popula-tion, supplies 60% of the raw ma-terials required by the industrial sector and contributes 40% of to-tal export earnings.
Despite the high level of em-ployment in the sector, it directly contributes only 15%-19% to an-nual gross domestic product, de-pending on the rainfall pattern, and this is a statistic that under-states the true importance and dominance of the agricultural industry. it is generally accepted that when agriculture performs poorly, the rest of the economy suffers.
there are an estimated 1,5 mil-lion small-holder and commu-nal farmers occupying a total of 21 million hectares in Zimbabwe. the greatest challenges faced by the sector can be summarised as follows:lAccess to inputs: it takes too
long to get input credit agreed and often the funds available are in-sufficient to get the correct quan-tities or the volumes are not at-tractive to suppliers.lAccess to credit: Farmers
struggle to access credit for in-puts due to factors such as; a lack
of conventionally accepted collat-eral for formal finance, and/or no track record / history. in addition, past experience has made con-tract buyers nervous of providing inputs.lLogistics: Zimbabwe has
eight provinces with 59 districts and 1 200 wards or municipali-ties. Most buyers and input sup-pliers limit collection and distri-bution services to the district lev-el as the high cost of going deeper into the field makes it uneconom-ical. Furthermore, most buyers and input suppliers do not want to deal with volumes of under 20 or 30 tonnes and are not prepared to stock small supply shops without upfront payment.lKnowhow: Selecting the
right crops and strains of seed for the land reduces risk of fail-ure/ under-production. Balancing land usage between seasonal and higher frequency crops reduces concentration risk of a crop fail-ing and reduces the risk of cash-flow shortfalls. Seed strains with greater resistance and higher pro-duction levels reduce risk of fail-ure/ under-production. irrigation kits reduce risk of failure/ under-production and allow higher fre-quency crops/ horticulture to be introduced to again reduce the risk of cash-flow shortfalls.
ict is a critical component to addressing these issues and, in so doing, elevating small-holder farmers out of a subsistence ex-
istence to commercial sustaina-bility. A value chain linkages and management solution, which in-creases visibility and stimulates linkages between all stakeholders in the value chain of small-hold-er farmers, ultimately providing an agricultural reference bureau, can make huge differences.
in east Africa, such a platform has been in place for a number of years, in 2014 the platform had in-creased farmer revenue by 8% on average and off-taker intake by 14%. this is an impressive im-pact in markets that were already better structured than our own in Zimbabwe.
Hurudza Zimbabwe (Pvt) ltd, is a local company that has taken the original concept developed in east Africa, adapted it to the lo-cal needs of the Zimbabwe mar-ket and built an ict solution that helps overcome many of the chal-lenges. the platform creates an ecosystem that reduces the risks
and improves efficiencies, which ultimately improve; production levels, sustainability and prof-itability for all participants in the physical and financial value chains, elevating small-hold farm-ers out of a subsistence existence to commercial sustainability.
the platform collects, main-tains and manages physical and financial supply chain data through multiple channels, in-cluding mobile devices, relevant to the target end-users. the de-mographic and transactional data are then analysed and, using spe-cial scoring models developed by g-analytiX for both the east Afri-can version and now the Zimba-bwe implementation, combined with accessing Zimbabwe’s lead-ing credit reference bureau, the Financial clearing Bureau (FcB), establishes a financial identi-ty, i.e. a searchable score or rat-ing, for participants in the val-ue-chain, which, in turn, creates
economic empowerment though greater access to affordable for-mal financial services.
the Hurudza solution has been selected for a proof of concept (Poc) under the livelihoods and Food Security Programme (lSFP) in Zimbabwe. lSFP is a multi-year £70 million ($100 million) poverty reduction and econom-ic growth programme, support-ed by DFiD designed to improve the nutrition and food security of smallholder farmers and consum-ers across eight diverse agro-eco-logical districts of eastern and Northern Zimbabwe.
in addition, Hurudza is also working with other NgOs and bodies such as the Zimbabwe Farmers’ union, with which a Mou has been signed, to acceler-ate the economic empowerment of smallholder farmers. lFor more information,
Small-holder and communal farmers struggle to access credit for inputs
Zimbabwe (Pvt) Ltd
Hurudza
Economically Empowering Agricultural Value Chains
Hurudza’s Agrilife platform is an Agricultural Reference Bureau and Value Chain Linkages & Management solution, which increases visibility and stimulates linkages between all stakeholders in the value chain of smallholder farmers. Mobile Transaction Capture Market Linkages & Targeting Loyalty Cards Reference Bureau Stock/inventory Management Financial Transactions Management
Credit risk – busting some mythsCredit Protection Supplement
NewsDay Friday July 24 2015 21
FOR many people the subject of credit risk management and measurement is viewed almost as a “dark art”,
practiced by specialists using sophisticat-ed tools and methods. Many people equally are quick to lay the blame for both global and local financial credit-fuelled crises on these practitioners.
However, unless one is delving into the world of exotic financial instruments, the reality of credit risk is actually much more simple and comprehensible to the majority of people. So let’s bust some myths, break-down the barriers and open the doors to greater access to finance.
Many studies over the years have shown that humans are honest in nature — typ-ically, only between 5% and 10% are nat-urally dishonest. Statistics from Zimba-bwe’s leading Credit Reference Bureau (CRB), the Financial Clearing Bureau (FCB), confirm this assertion well with a “bad rate” on searches of between 5% and 6%.
If non-performing loan (NPL) rates for lenders are higher than this, then there is likely to be an issue with how applicants are being selected for credit facilities and subsequently managed, i.e. credit is either being afforded to those where there is al-ready evidence of not being good at paying back, or the amount of credit being pro-vided is skewed towards higher risk appli-cants.
Too often, the term “risk” is confused with “uncertainty”. Equally, “capacity” to pay back is given greater weight than “willingness” when assessing applicants. Credit “risk” is something measurable. If it cannot be measured reliably then it is “uncertainty”. As credit “risk” is meas-urable, so it can be used to take decisions and price products, i.e. higher-risk appli-cants may still be given credit but at an el-evated interest rate to cover the increased probability of default. The element of “un-certainty” requires insurance to cover the potential loss. Credit providers have often used collateral as insurance. However, the reality is that, for the lender, collateral is inconvenient as a form of insurance — much better is for the lender to require the borrower to cover potential loss with ap-propriate insurance.
The “risk”, or probability, of default is generally measured using a credit score, calculated using a number of factors that usually provide predictive measures and indicators combining both the “capacity” and “willingness” of an applicant to repay a loan. FCB was the first CRB in Zimbabwe to integrate credit scores for individuals into its standard reports in 2014.
When it comes to measuring “risk”, un-derstanding “willingness” is arguably more important than “capacity”, especial-ly in markets with limited credit history data available. Analysing an applicants the track record of regularly paying other credit and service providers on time, over a period of time, can be used to understand the “willingness”. In the absence of such track record, it is also possible to assess “willingness” using psychometrics.
Equally, there are significant differenc-es in the ways women and men Small- and Medium-Size Enterprise (SME) owners ap-proach, access and use credit to start and grow their businesses. Women are recog-nised to be lower risk. Therefore, it should be a priority to incorporate women-spe-cific solutions, with more suitable cred-it terms and better risk assessment prac-tices, into the frameworks for improving credit access in the SME sector.
Evidence suggests that credit scoring models, based on psychometric testing, generate significantly fewer rejections of creditworthy small business owners than traditional conventional models. As part of its SME Ratings initiative, FCB is col-laborating with Harvard’s Entrepreneuri-al Finance Lab (EFL) to further extend the availability of this type of scoring and as-sessment to lenders in the SME sector in Zimbabwe.
Finally, credit risk assessment and man-agement need not be over-sophisticated and access to affordable credit can be in-creased significantly by using the tools
Servicing the financial services sector in Zimbabwe for over 25 years as a trusted credit clearing bureau and custodian of credit information sharing and referencing data. In August 2014, FCB introduced credit scores into its standard reports. As at end of June 2015, approximately 500,000 individuals had been scored (economically empowered) since it was introduced and approximately 50,000 individuals are being scored every month. Multiple modes of usage are supported to suit your institutions needs:
Web-based Search API / Web service Batch processing
Portfolio Monitoring Mobile Phone
COMING SOON !
Comprehensive suite of reports: Standard Skip Trace Exposure Directors Employment Connections
and data available through a credit refer-ence bureau like FCB. We encourage eve-ry Zimbabwean to make it their business to know their credit status in 2015 and to take responsibility for their own economic em-powerment. For further information, please con-
THERE are significant differences in the ways women and men Small- and Medium-Size Enterprise owners approach, access and use credit to start and grow their businesses. Women are recognised to be lower risk. Emily Mafuke runs a tile manufacturing fi rm
XDS Credit Bureau offers smart information solutionsCredit Protection Supplement22 NewsDay Friday July 24 2015
ExpErt Decision Systems (xDS) is an information bu-reau in Zimbabwe offering
both consumer and commercial reports, credit scores and analyt-ics giving a complete data picture. We believe in delivering innova-tive, user-friendly, and affordable information solutions and tech-nology that can be trusted and tailored to your specific business needs. xDS Zimbabwe is part of a pan-African group that has op-erations in South Africa, Ghana and Nigeria. the parent company has also been involved in projects across Africa, positioning us as a uniquely African company with a solid international track record.
A unique combination of strong business practices, information technology skills and experience en-ables us to provide consumer, busi-ness and personal solutions that sig-nificantly contribute to organisa-tions making smarter decisions.
With the largest database of Credit profiles in Zimbabwe, xDS will help your business successful-
ly manage credit risk through con-sumer and commercial credit re-ports and specialised credit man-agement analytics.
xDS’ product offering includes, but is not limited to, consumer cred-it exposure reports, trace reports, agro exposure reports, employment verification, tenant verification and commercial reports. All these re-ports aide in the prevention of fu-ture delinquencies by analysing be-havioural patterns.
xDS Zimbabwe has brought to-gether expertise across the agricul-ture industry to enable small scale and rural farmers to access finan-cial and contracting services. Our suite of solutions encourage sus-tainable lending and contracting to agriculture and have been tailor-made for the small-scale and com-munal farmers. through our Au-thentication Services, clients can access verified information on po-tential employees, tenants and busi-ness service providers which will help you make better decisions. Ver-ify employment history, educational
of robust risk management frameworks. We have noted the increase in credit coming from non-bank sources. This pos-es challenges in the market particularly in the absence of credit bureaus. It is criti-cal that as the financial services sector tries to meet demand for credit across both retail and corporate customers a clear and well-defined risk management framework be followed” — Barclays Bank Zimbabwe managing director George Gu-vamatanga, March 2011 (2010 Annual Re-port)
Supporting infrastructure for Ba-sel II
“The Reserve Bank of Zimbabwe en-courages banking institutions to con-sider funding the setting up of a Credit Reference Bureau. The establishment of a Credit Reference Bureau will provide a central database for credit information sharing which will, among other things, augment credit risk management and provide the requisite support infrastruc-ture for the implementation of Basel II.” — The then RBZ Governor Dr Gideon Gono.
“The (Basel) Accord recognises three main risk categories: i.Credit Risk, ii. Mar-ket Risk, iii. Operational Risk and ultimate-ly a bank must hold capital against these three types of risks. The role of credit ref-erence bureaus is the first risk category of Credit Risk. We enable banks to objec-tively and accurately assess the quality of its credit assets and thereby evaluate and analyse the concentration of its risk expo-sures.” — Farayi Dyirakumunda, XDS Zim-babwe, June 2015
Sharing credit information to en-hance access to affordable finance
The basic function of a credit bureau is to enable banks to share information about borrowers for business decision making, that is credit granting decisions.
The bureau also keeps a credit history re-cord of the borrower and can even assign a score related to the credit history. Good credit scores can ease access to more credit which could be an opportunity for borrowers to access credit without the restrictive collateral requirements … It is also high time that Zimbabwean com-panies get credit ratings so as to broad-en their financing options. It is currently difficult for corporate borrowers to issue debentures as they have no credit rating scores to determine the yields. — King-dom Market Report with Anymore Taruvin-ga February 2012.
“Credit information-sharing is a critical component of economic empowerment. In order for the financial services sector to be able to increase access to afforda-ble finance while managing risk, the visi-bility that credit information-sharing pro-vides is essential.” — Dr Kupukile Mlambo, Reserve Bank of Zimbabwe deputy gover-nor, June 2015
Assessing and pricing risks“A functional credit bureau would ena-
ble businesses to effectively assess coun-terparty risks and hence improve the ef-ficiency of their processes. It also allows for the accurate pricing of risk and there-fore will allow for the wider availability of credit and greater volume of sales in the credit retail industry.” — The late Bul-awayo-based economic analyst Eric Bloch, November 2012
“Money and information are the criti-cal components in lending. The very sur-vival of any provider depends on the availability of both ingredients and full information allows for the accurate pric-ing of risk thereby allowing for the wider availability of credit and a greater volume of sales across industries.” — Farayi Dyir-akumunda, XDS Credit Bureau, June 2015
Checking the growth of non-per-
forming loans“The absence of a credit bureau is the
reason why bad debtors are increasing. I am not saying in countries where the bu-reaus exist there are no bad debtors. They will always be there, but not as in coun-tries where it is not (in existence).Every-one has borrowed from someone. So, no matter how tight one is on debt, bad debtors will always be there but could be less if there was a credit bureau.” — Tru-worths Zimbabwe Chief Executive Officer Themba Ndebele presenting the compa-ny’s financial results, March 2013
“We are working on a national cred-it bureau to minimise bad apples in the banking sector. That we are going to do without fail. It will go through just like any other important Acts. We need to find a lasting solution to non-performing loans.” — RBZ governor John Mangudya, speaking at the Confederation of Zimba-bwe Industries (CZI) annual congress, July 2014.
Functions & benefits of a Credit Ref-erence Bureau (CRB)
“The completion of the framework, which is targeted for March 2013, will pave way for the commencement of op-erations by accredited bureaus. The bu-reau is expected to overcome the ex-istence of asymmetric information be-tween borrowers and lenders, gathering reliable information on potential borrow-ers on their past repayment behaviour that would determine the credit risk. It will also reduce the default rates through the development of payment histories or reputation collateral used in securing more competitive loan rates. The credit bureau will stop debtors who go around borrowing money from many banks without repaying it as there would be a track record.” — The then BAZ and BCZ president George Guvamatanga, speaking
at the Business Council of Zimbabwe (BCZ) conference, February 2013
“The purpose of CRBs is — fundamen-tally — to address asymmetries with re-gard to credit information in such a way that socio-economic issues relating to in-debtedness for instance, are better man-aged and the risk of doing business with an individual or company is better un-derstood. However, it is very important to point out that a CRB is purely a trust-ed custodian of information which nei-ther holds nor expresses opinions re-garding individuals or companies. A CRB does not ‘black list’ anybody or any enti-ty, which is a very common misconcep-tion. It is the credit providers and the courts that ‘black list’ people and compa-nies — the CRB simply stores and shares the information provided to those that are authorised to access it. A modern CRB — and this is where FCB is heading — is actually the custodian of far more posi-tive data than negative data and, as such, can help increase access to affordable fi-nance for those with good credit records.” —Alan Goodrich, FCB Managing Director, May 2014
“A credit reference system is expected to improve the performance of the finan-cial sector and stimulate economic devel-opment by making lending and borrow-ing easier, faster, and ultimately cheap-er. Further, borrowers can use their posi-tive credit history as “collateral” to access loans at better rates and seek more com-petitive terms and from different lend-ing institutions. A credit reference sys-tem promotes and supports a high lev-el of trust between lenders and borrow-ers — resulting in an increased volume of credit in the economy. In addition, timely and accurate information on borrowers’ debt profiles and repayment history ena-bles banks to make more informed lend-
ing decisions.” — RBZ deputy governor Dr Charity Dhliwayo, July 17 2015
So close, yet so far: previous at-tempts to set up Credit Reference Sys-tem
“Unfortunately we are bound by cer-tain confidentialities, but we are working with an international technical partner to set up a credit bureau, which should be operational by September of this year (2012).” — BAZ Chief Executive Officer Si-jabuliso Biyam, June 2012
“The responsibility of the credit refer-ence bureau has moved from BAZ to the Reserve Bank of Zimbabwe and Ministry of Finance. We hope they will be able to finalise it this year.” — BAZ and BCZ pres-ident George Guvamatanga, speaking at the Business Council of Zimbabwe (BCZ) conference, February 2013
Privacy of information & confidenti-ality issues
“ There are also issues to do with the privacy of information and the associ-ated sensitivities, it is important that the government through its various arms comes up with a legislative framework that will create a win-win scenario for the economy and the various economic agents without prejudice to any one sec-tion.” — RBZ Registrar of Financial Institu-tions Norman Mataruka, February 2014
“Building a full-service credit reference bureau (CRB) continues to require signifi-cant investment in terms of systems and capacity building. However, the main challenge is to raise awareness of the pos-itive benefits of sharing credit informa-tion and acceptance levels amongst both credit providers and consumers of credit. We have had to work hard to break down some of the barriers that arise from a fear of competition and, to some extent, con-fidentiality issues.” — Alan Goodrich, FCB Managing Director, May 2014
l FROM PAGE 19
background, criminal history, pay-ment patterns and trade references.
xDS believes in providing as much information as is available in order to get a detailed profile of indi-vidual or company being transacted with. As such, our credit exposure
report details demographic data, ad-dress history, detailed payment his-tory, amounts owed, length of cred-it history and a bureau rating. this is the standard across all the sec-tors, with tailor made solutions de-pending on the needs of the particu-
Stakeholders view on importance of credit reference system
XDS Zimbabwe Bureau Products in the Credit Value Chain
lar group of com-panies.
Our It infra-structure pro-vides data securi-ty standards that match a credit bu-reau that is oper-ating within a reg-ulated credit mar-ket. It is xDS’s intention to be rec-ognised as a trust-ed custodian for information espe-cially that which has been provided by credit provid-ers. to that end, a robust data se-curity policy has
been put in place which outlines the rules to be followed when handling and storing data that has been col-lected from credit providers. As a result, all data entrusted to xDS is secure, safe and guarded against any misuse by internal or external parties.
smart . information . solutionsProviding Credit Reports that help you take calculated risk
