Typically, the Credit Bureau operates at full functionality in developing markets with the primary goal of facilitating access to finance for small and medium-scale enterprises. Throughout the world, the SME sector accounts for over 60% of the employed workforce. That notwithstanding, the development of this sector remains constrained by a lack of access to investment capital arising out of a scarcity of investment data in the credit environment to accurately assess the risk factors that obtains in each credit application. Here in Guyana our financial institutions simply do not know enough about the credit history of most applicants for loans.
Lending institutions have responded to this challenge by either imposing high interest rates to adequately ‘cover’ the extent of their exposure, or else, deny the loan application altogether.
In either case the SME is placed at a disadvantage.
This is where the Credit Bureau comes in. A study done on 5,000 firms in 51 countries by the International Finance Corporation indicates that constraints in obtaining financing for small business development declined from 49% to 27% after Credit Bureaus began operating in their respective regions.
The consumer data which is usually accumulated by the Credit Bureau exists in small clusters in the custody of various agencies and is usually shared on an informal as-needed basis.
This mechanism allows credit information to be shared without due regard for issues of verification or accuracy and, frequently, without the knowledge and/or consent of the owner of that information.
Credit Bureaus serve as legal repositories for consumer credit data. Such data, typically, comes from financial institutions including banks, micro-financing institutions, credit unions insurance companies and utility companies.
The information is professionally processed to ensure accuracy then processed into structured Credit Reports that provide particular insights into such risk-related concerns as a lender might have.
The ‘checks and balances’ that govern the operations of the Credit Bureau are regulated by legislation. There are harsh penalties for running afoul of the legislation. Access to credit information is limited to institutions authorised by the Bank of Guyana.
It is important to make the point that consumer data in the custody of the Credit Bureau guarantees its security, by law. Procedures associated with the legitimate accessing of credit reports ensure that instances of accessing are electronically logged. Those records are available to the consumer. This safeguard precludes the possibility of unauthorised access.
Globally, the Credit Bureau attaches overwhelming importance to the security of data. Our Credit Bureau data is usually stored offshore and protected by Tier Three data centre protocols, the highest such protection standard in the entire region, and just one level below the highest available anywhere in the world. No physical files exist in our local office or anywhere else. Staff at the Credit Bureau have no routine access to credit data in the possession of the bureau.
The principle of “permissible purpose” as set out in the Credit Reporting Act of 2010 addresses the circumstances under which Credit Reports can be made available with particular specificity. In a nutshell, unless a Credit Report is required in connection with a credit-related transaction, the law denies access.
On the whole, the Credit Bureau is closely monitored by the Bank of Guyana. More than that the law provides for specific punitive penalties for transgressions of consumer privacy.
In this new environment, the credit bureau stands ready to fulfil its mandate to the stakeholders it was first established to serve. But before this can be accomplished, a critical requirement of the Credit Reporting Act, that of consumer consent remains to be fulfilled. Consumer consent will essentially unlock the many opportunities provided for through the vehicle of the Credit Bureau.
Here it should be stated that no information can be uploaded into the Bureau’s data banks unless so authorised by the consumer.
This is by far the most effective regulatory mechanism at the disposal of the consumer.
At the inception the process of data collection is most likely to be slow and deliberate. This is in order to ensure accuracy of data. We anticipate that
authorised credit information providers will soon be approaching their customers in an effort to garner credit information.
