By David Falconer
Three years into its introduction the local Credit Bureau seems set to reshape the country’s financial landscape, more particularly, to forever alter the procedures associated with lending.
On this the third anniversary of this service to the local market it is apposite to reflect on the evolution of the service and on the place that it currently occupies in the financial services system.
The Private Sector Assessment Programme of 2006, the National Competitiveness Strategy 2006 and the National Economic Summit of 2007 had all, in their respective ways, underscored the importance of enhancing the country’s financial environment in order to expand the private sector investment and export development landscape. Critically, these developments had laid bare the constraints confronting commerce arising out of the lack of access to financing, particularly for the micro, small and medium-scale enterprises, categories of business which comprise more than 90 per cent of the local private sector.
In other countries, a Credit Bureau has proven to be a reliable mechanism for addressing some of the critical problems associated with accessing finance and it is against this backdrop that the decision was taken to provide such a service in Guyana.
The passage into law of the Credit Reporting Act in 2010 paved the way for the introduction of a Credit Bureau in Guyana. Among other things, this legislation set out the principles and processes that would guide the operation of the Credit Bureau, including the assigning regulatory and oversight authority to the Bank of Guyana.
The search for a suitable Credit Bureau to serve the Guyana market attracted the interest of several international services and the Inter-American Development Bank played a key role in the shortlisting of the services thought to be best equipped to meet Guyana’s needs. The Icelandic multinational company, Creditinfo, emerged as the choice for Guyana.
On July 15, 2013, a licence to operate the country’s first ever Credit Bureau was handed over to Creditinfo by the then Governor of the Bank of Guyana, the late Lawrence Williams. A subsidiary named Creditinfo Guyana Inc was established and launched on September 29, 2013.
Thereafter, the institution introduced a transparency, information-sharing and risk-management regime to the Guyana financial sector.
Databases, by their very nature are challenging facilities to create. There is the ever present risk of multiple errors ranging from input inconsistencies to inaccuracies in raw data.
The imperative of the Bureau to make judgements on creditworthiness also imposed a considerable responsibility to ensure the accuracy of the information used to make those judgements. The weight of the responsibility compelled the Bureau to work tirelessly with stakeholders in the process of properly preparing data for inclusion in the Credit Bureau system. This exercise went on for more than a year.
In 2014, Creditinfo hosted several important stakeholder fora ranging from training sessions and workshops to IT sessions for staff of all data providers. The Bureau also recruited facilitators from Europe to participate in a key Credit Risk Management seminar for local banks. 2014 was also the year in which the SeeRisk Business Report and the SeeID Identity Verification reports were launched on the Guyana market. In that same year, the Guyana Bank for Trade and Industry Ltd sent the first upload of credit data from Guyana to the Bureau’s live database.
In January 2015, the Institute of Private Enterprise Development Ltd (IPED) became the first local institution to use a Credit Report in determining approval for a loan application.
The biggest challenge that Creditinfo was to face arose out of the newness of the service to the local financial sector and the understandable queries that arose in the minds of potential customers. Credit reporting involved sharing sensitive personal information with a third party, a circumstance that gave rise to some measure of distrust.
The law required that consumers give consent to the sharing of data with the Bureau and the myths regarding the likelihood of misuse of information surfaced.
This problem was solved on November 26, 2015 when the Credit Reporting (Amendment) Act of 2015 was passed into law in January 2016. All financial institutions that operate under the Financial Institutions Act were now required to acquire and use a credit report for the provision of credit-related services, removing the hurdle of consumer consent, though this remains necessary in accordance with laws governing privacy and confidentiality at the point where a financial institution or lender wishes to access a credit report. This change created a larger and more comprehensive database of credit information that better addresses the reporting needs of users while allowing banks to apply the best risk management techniques on potential credit facilities with a view to reducing default and delinquency rates. Measurable trends in increased consumer borrowing, reduced rates of delinquency and default in the financial sector and an upsurge in economic indicators all point to the move toward much needed development.
For a small but resilient nation that stands on the brink of oil-induced prosperity, well developed systems for credit and a favourable lending environment are critical tools for staying ahead of the ensuing challenges.
