The Credit Reference Databank at the Bank of Tanzania is expected to go live in September this year in an effort to facilitate sharing of borrowers’ information among lenders.
BoT Deputy Governor (Financial Stability and Deepening) Mr. Lila Mkila announced when opening a one-day workshop of stakeholders on establishment of the credit reference databank held at the BoT Conference Centre in Dar es Salaam on Wednesday.
“Hardware and preliminary software have already been supplied and installed...Pilot testing is expected to begin in June 2012 and the databank is expected to go live in September 2012,” Deputy Governor Mkila said.
Having credit information system in place has many advantages to the financial sector, including improvement of performance of the financial sector and stimulating economic development by addressing impediments that have been contributing to increased non-performing loans in the banking sector as well as cost of borrowing. Also, borrowers may use their positive credit history as collateral to access loans at better rates and seek more competitive terms from different lending institutions.
“By addressing the problem of information asymmetries, the credit information sharing system is expected to promote increasing level of trust between lenders and borrowers, resulting in an increased volume of credit in the economy,” Mr. Mkila said.
This trust, the deputy governor said, would also increase transparency and competition among lenders.
The BoT deputy governor also told chief executive officers and senior officials of commercial banks, financial institutions and other stakeholders that the bank has already invited interested operators to apply for credit reference bureau licenses.
“Some credit reference bureau operators, including some renowned international credit bureaux, have shown interest and we expect to receive applications from some of them in the very near future,” he said.
Private credit reference bureaux will have access to the BoT managed Credit Reference Databank as well as other credit sources which are not regulated by BoT. Commercial banks will be getting information from the private credit reference bureaus.
During the workshop, consultants from the Czech Republic-based firm, CreditInfo International, Radek Bittner, Filip Kratochnil and Martin Koubik, briefed stakeholders the status of the establishment of the credit reference databank as well as what is expected from the banks in contribution of data.
Some workshop participants wanted to know how the databank will come into being when there was no unique identification (national ID cards) in Tanzania. They also wanted to know whether BoT was hosting the credit reference databank temporarily or permanently, as they charged that in other countries the function is being done by private firms.
Responding, Mr. Bittner said, having a unique identification was an added advantage, but the databank could be in place even without it. He gave an example of a related project in Sudan where the databank has taken off despite having no national ID cards.
As regards hosting the databank at BoT, the Director of Banking Supervision, Mr. Agapiti Kobello, said the central bank is mandated by the Bank of Tanzania Act 2006 to establish the databank as well as license and regulate private credit reference bureaus.
He added that BoT had in the past allowed Tanzania Bankers’ Association to host the credit reference databank, but some banks were reluctant to share information through it.
“That’s why it is housed at BoT. In future BoT will be happy to let a private operator run the databank,” Mr. Kobello said.
In his concluding remarks, Mr. Kobello said if non-deposit taking institutions will not cooperate with private credit reference bureaus, appropriate measures will be taken to ensure compliance.
He appealed to commercial banks to ensure they supply correct information to the databank in order to make the data credible for the purpose of sharing.
In the meantime, consultants will meet commercial banks information technology experts in order to learn how to extract and submit data to the databank.
The establishment of the credit reference data bank in Tanzania is the most important step of improvement credit market and economic development in Tanzania. The credit reference bureau will help to reduce the cost of borrowing due to the information’s which were required by the lender in the past for the borrower will be available and well assessed by the lender in order to do risk assessment of the borrower .But the only thing which will be difficult for the lender will be the proof of address of the borrower because Tanzania there is no physical address , no street name for the most of the town and this will be very difficult and challenging situation for the most of the lender .In the west anyone go to bank the two thing which are very important before open an account or ask for loan or any credit required to provide the proof of identification (passport or approved ID) will be required to provide and prove of address will also required to be provided. If the government will help by improve these two things, the cost of borrowing will go down and we will expect to see the single digit interest rates for borrowing in the market. Mackde-UK.
ReplyDeleteThank you Mackde for the elaboration;Are you,real, in the UK?I doubt
ReplyDeleteDavid V
David v please stop acting like that..being in uk or not does not make you good at english..he just happened to have poor english and there are lots of native citizen in uk who are having poor english too..the good thing is that "point delivered" & thanks for your deep insight Mackde-Uk.
ReplyDelete