by Curlan Campbell
- Credit bureau will improve relationship between borrowing customers and credit-offering institutions of ECCU countries
- Credit bureau collects information from financial and non-financial entities
- Credit bureau in ECCU will address information symmetries in lending process
A credit bureau for the Eastern Caribbean Currency Union (ECCU) is considered a high priority for the Eastern Caribbean Central Bank (ECCB) to tackle liquidity in the financial system and high non-performing loans.
ECCB Governor Timothy Antoine reiterated the bank’s commitment to the provision of the Credit Reporting system as he addressed stakeholders during a media sensitisation webinar organised by Compete Caribbean.
According to the ECCB, a credit bureau is one of the two main types of credit reporting institutions. It collects information from financial and non-financial entities, including microfinance institutions and credit card companies. It provides comprehensive consumer credit information with value-added services such as credit scores to private lenders.
Establishing a credit bureau will improve the relationship between borrowing customers and credit-offering institutions of countries served by the ECCU, including Grenada.
Governor Antoine stated that the credit bureau would play an essential role in facilitating credit information sharing since credit information sharing is critical for the growth of credit and improving access to finance. He explained a credit bureau in the ECCU will address information symmetries in the lending process, providing lending institutions with timely access to information, which helps assess the risks of potential borrowers. He said this would enable credit providers to price lending more effectively by reducing uncertainty regarding potential borrowers.
He lamented that while ordinary people seeking loans cannot access such loans, there is the reality of the longstanding issue of excess liquidity in the currency union coupled with the high non-performing loans in ECCU which now stands at a worrying 11.8% and growing.
“Could you imagine on one hand there are potential borrowers looking for looking for credit, and on the other hand, you have potential lenders wanting to make loans, but somehow it is not happening at the pace and the rate that it needs to, and one of the reasons for that is the absence of a credit bureau,” said Governor Antoine.
The ECCB Governor further added that the lack of proper facilities for financial institutions to conduct appropriate credit underwriting to assess and price risks would be addressed with the establishment of the credit bureau.
The draft credit reporting legislation makes provisions for the ECCB to grant licences to people who wish to operate or carry on the business of a credit bureau in the ECCU. Financial institutions in the ECCU will be allowed to take part in the ownership of the credit bureau as provided for in the draft credit reporting legislation. The expectation is that once the legislation is passed, a credit bureau licence will be issued to an operator that can provide all the ECCU territories with the most consistent, reliable and high-quality credit reporting service.
The credit bureau will not only collate and manage credit reports but also provide other services, including risk analysis, monitoring and dispute management.
Once this new system becomes operational, banks and other licenced financial institutions will provide the credit bureau with information on customers’ credit history, based on provisions made in the legislation. One’s credit history through their credit report will be made available to these institutions whenever someone requests loans. On the flipside, customers will access their credit reports once per year for free.
According to the ECCB, the ECCU Credit Bureau will operate once the draft credit reporting legislation is enacted in all the ECCU territories.
The credit bureau will serve the 8 territories of the ECCU and is expected to have offices in each of these territories. Offices are expected to provide public services, including providing borrowers with copies of their credit reports and dealing with queries that lenders or borrowers may have. The credit bureau’s headquarters will be in one territory determined by the credit bureau operator, and then the public will be informed.
Mr. Governor, I know you’re a man of your
word. we rellay do welcome this. I prayer it dosen’t take another milestone to have it going nor does it fall by the wayside.
I applaud this initiative, long over due for the region, the disparity existing between those looking for credit and those with the means to lend is often lost on the shore of tribalism and friendship, rather than in the spirit of intention to repay , needs to be met, and capacity to do so
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Very true that……Hopefully, it impacts poor hardworking folks ,especially, those who can do with an extra push. A push that can break the viscous cycle of poverty.
There are folks who honestly and tirelessly work, pay their bills when due live within their means and still can’t make head way. However, these very same people do not have sufficient collateral and credit to be approved for loans. No transaction history which can be used or assess risks.
On the other hand, we have seen financial institutions offer loans which is used purchase items that depreciate in value. For example, car loans instead of house and land which can appreciate in value.
Hopefully, folks will not have sell their grandparents and parents to the banks in order to afford loans.