Workshop on making finance work for africa nairobi kenya 5 6 march 2007
Download
1 / 14

WORKSHOP ON MAKING FINANCE WORK FOR AFRICA – NAIROBI, KENYA 5-6 MARCH 2007 - PowerPoint PPT Presentation


  • 105 Views
  • Uploaded on

REGIONAL COLLABORATION ON BUILDING CREDIT REPORTING SYSTEMS; PRIORITIES AND OPPORTUNITIES IN THE EAST AFRICAN COMMUNITY BY JUSTINE BAGYENDA, EXECUTIVE DIRECTOR SUPERVISION - BANK OF UGANDA. WORKSHOP ON MAKING FINANCE WORK FOR AFRICA – NAIROBI, KENYA 5-6 MARCH 2007. Agenda. Introduction

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' WORKSHOP ON MAKING FINANCE WORK FOR AFRICA – NAIROBI, KENYA 5-6 MARCH 2007' - jolene


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Workshop on making finance work for africa nairobi kenya 5 6 march 2007

REGIONAL COLLABORATION ON BUILDING CREDIT REPORTING SYSTEMS; PRIORITIES AND OPPORTUNITIES IN THE EAST AFRICAN COMMUNITY BY JUSTINE BAGYENDA, EXECUTIVE DIRECTOR SUPERVISION - BANK OF UGANDA

WORKSHOP ON MAKING FINANCE WORK FOR AFRICA – NAIROBI, KENYA 5-6 MARCH 2007


Agenda
Agenda SYSTEMS; PRIORITIES AND OPPORTUNITIES IN THE EAST AFRICAN COMMUNITY

  • Introduction

  • Where are we now in the East African Community?

  • Priorities for Regional Co-operation

  • Possible Benefits of a Regional Approach to Credit Reporting Systems

  • Practical Consideration

  • Uganda’s Experience

Making Finance Work for Africa


Introduction
Introduction SYSTEMS; PRIORITIES AND OPPORTUNITIES IN THE EAST AFRICAN COMMUNITY

  • Credit reporting refers to the exchange of borrower payment history information between lenders.

    - data in credit reports enables lenders to better evaluation risk.

    - provides for automation of credit decisions process.

    - Reduces time and cost of extending credit – often results in:

    (i) expansion of credit markets

    (ii) more competition

Making Finance Work for Africa


Where are we now in the east african community
Where are we now in the East African Community? SYSTEMS; PRIORITIES AND OPPORTUNITIES IN THE EAST AFRICAN COMMUNITY

  • Monetary Affairs Committee of Central Bank Governors of the three Partner States i.e. Kenya, Tanzania and Uganda Resolved:

    “The three Central Banks are urged to hasten the operationalisation of the CRBs. (Arusha Tanzania May 2006)”

  • In all the three Partner States, Efforts have been intensified with regard to Establishment of CRB.

  • No significant provider of Credit information in the East African Region

Making Finance Work for Africa


Priorities for regional co operation
Priorities for Regional Co-operation SYSTEMS; PRIORITIES AND OPPORTUNITIES IN THE EAST AFRICAN COMMUNITY

  • Legal and Regulatory Framework.

  • Identity verification system both for enterprises and customers

  • Construction of national database for credit information of enterprises and customers.

  • Promotion of public awareness: (mobilize customers to take part in the establishment of credit reporting system)

  • Standardisation of the credit reporting industry.

  • Development of appropriate telecommunication system and technology.

Making Finance Work for Africa


Possible benefits of a regional approach to credit reporting systems
Possible Benefits of a Regional Approach to Credit Reporting Systems

  • Credit Reference Bureaus (CRBs) and Access to credit markets.

  • CRBs are tools intended to broaden the access to credit markets.

    • Banks often do not lend to individual customers lacking physical collateral

    • ….and therefore restrict their credit to their wealthiest customers

Making Finance Work for Africa


Possible benefits of a regional approach to credit reporting systems contd
Possible Benefits of a Regional Approach to Credit Reporting Systems (contd)

  • Access to Credit Markets

  • A good credit record represents an alternative and “wealth free” collateral: “a reputational collateral”.

  • ……that allows banks to lend to all customers independently from their wealth.

  • World Bank research done in 2004 shows that lending may increase substantially without increasing the risk exposure when banks supplement their own information with that provided by Credit Reference Bureaus.

  • Evidence from Argentina and Brazil shows:

    that a small bank when adding CRB data in its credit worthiness assessment could increase its lending up to 30% without increasing its risk.

  • Gains are higher for smaller banks.

Making Finance Work for Africa


Possible benefits of a regional approach to credit reporting systems1
Possible Benefits of a Regional Approach to Credit Reporting Systems

  • Credit Risk Management

    2. Credit information sharing makes it possible for banks to:

  • Improve their risk assessment

  • Extend credit to new but previously rationed creditworthy customers.

    N.B. By affecting credit origination, CRBs improve the access to bank credit

  • Measure the aggregate risk of their loan portfolios improving risk management

  • Market Access and Risk Management are in fact two faces of the same coin.

Making Finance Work for Africa


Possible benefits of a regional approach to credit reporting systems2
Possible Benefits of a Regional Approach to Credit Reporting Systems

  • Risk Based Supervision

    3. Credit Reference Bureaus may be a tool for more advanced risk based supervision:

    - What proves useful for Banks’ risk assessment is also useful for Supervisors’ control of banks’ risk exposures. Supervisors have used CRB data for:

    (i) on-site supervision

    (ii) off-site supervision

    (iii)control credit risk concentration

  • CRBs favour competition.

Making Finance Work for Africa


Possible benefits of a regional approach to credit reporting systems3
Possible Benefits of a Regional Approach to Credit Reporting Systems

  • Government and Society

  • Information availability – timely, accurate, up-todate.

  • Stable business environment for future investments.

  • Recognize the value of information to all stakeholders.

  • Borrowers consolidated positions.

  • Exposures with foreign lenders.

  • Information on loans after default.

  • Reject clients who deliberately apply for credit in many institutions and end up in delinquency or bad debt.

Making Finance Work for Africa


Practical considerations to a regional approach to credit reporting systems
Practical Considerations to a Regional Approach to Credit Reporting Systems

  • Coordinated Regional approach is an excellent way to exploit synergies and gain economies of scale in providing credit information affordably to what is, regionally, a relatively small market. But there are a number of practical considerations:

    • Legal Framework

      - There may be disparities between countries (e.g. on data/consumer protection/privacy laws) which may be difficult or at least very time-consuming to harmonise.

Making Finance Work for Africa


Practical considerations to a regional approach to credit reporting systems contd
Practical Considerations to a Regional Approach to Credit Reporting Systems (contd)

  • Setting regional standards (e.g. concerning CRB operations, date, codes of conduct) of course a worthy goal, but how long does it take to achieve.

  • Sensitivity of information:

  • There is a political risk that the general public may object to confidential personal information being stored ex patria.

  • Agreeing on what to do between the various countries and the much large number of actors.

Making Finance Work for Africa


1 uganda experience
1. Uganda: Experience Reporting Systems (contd)

  • Legal Framework provides for the Establishment of the Credit Bureau Provider

  • Credit Bureau Provider was selected by BOU

  • Participating Institutions (PIs) are yet to agree on the pricing structure

  • World Bank, KFW and GTZ/EU are willing to financially support the implementation of the CRB project.

  • Service level agreement between PIs &the Credit Bureau Provider will be signed by March 30th 2007.

Making Finance Work for Africa


Thank you

THANK YOU. Reporting Systems (contd)


ad