Friday, April 3, 2015

Credit info assures bankers of the best practices for credit services

Credit info Tanzania Limited which carries out credit reference business in the country has collected  information data for 1.2 million customers of the credit lenders from financial institutions since it was commissioned to provide such services by Central Bank of Tanzania BOT) in June 2013, it has been learnt. The institutions in the country include regulated banks and microfinance institutions, non-regulated institutions such as those for hire purchase and leasing housing, retailers and other credit providers. The firm’s Chief Executive Officer (CEO) Davith Kahwa said in Dar es Salaam last week that, his company has been faced with a number of challenges during customers’ data collection in order to keep an up-to-date record of the estimated 5 million credit lenders in the country. He said in an exclusive interview and cited lack of reliable data from customers is a major reason one which has negatively affected their operation. Credit Reference databank system is an effort introduced by BOT to facilitate easy access to borrowers’ information by bankers and micro-finance lending institutions operating in the country and was launched for the first time in September 2012  According to Kahwa, among the data issues observed are lack of unique identifier such as the national identity, lack of location identifiers such as street names and building numbering and poor data quality of available information which involves errors in data entry. Another reason he cited are the information technology issues these are different IT related constrains particularly for small and regional banks. 

The BOT twin towers in Dar es Salaam city

“Despite of this minor hindrance however, the firm has been actively engaged in providing services and this does not mean that we are unable to match customer details accurately”, he said adding that based on their experience and the lessons learned from markets his firm has tried more to get as much data output as it is required. According to BOT, lack of credit information results in high lending and default rates for loans, as lenders cannot establish which borrowers are creditworthy and which are likely to default on loans.  It is hoped that more information for lenders will reduce loan defaults, lower interest rates and increase access to credit. Statistics made available by the BOT shows that, financial institutions have direct interaction with the target audience and that It is estimated that 17 percent (about 3.7million) of Tanzania’s adult population has access to bank accounts. Kahwa says that with these figures it is well estimated that, there are about 5 million loans or credit accounts in the market. This is a conservative estimate considering the fact that some people have more than one loan at more than one bank. Meanwhile, since the introduction of the credit reference services, banks and other financial institutions that grant credit to their customers make use of reports to assess their creditworthiness.

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