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Friday, June 05,
2020 / 06:00 AM / by Debtors Africa/ Header Image
Credit:
Credit Bureaus are institutions that review
customer credit positions and award a score that reflects the credit history of
the individual or organization as well as the repayment of the borrower (e.g.
issuing dud checks over a period or regular renegotiation of payment terms). A
credit bureau provides lenders with decision-making information about borrowers
that can be used for debtor profiling. According to Wikipedia a credit bureau
is, "a data collection agency that gathers account information
from various creditors and provides that information to a consumer reporting
agency in the United States, a credit
reference agency in the United Kingdom, a credit
reporting body in Australia, a credit
information company (CIC) in India, Special Accessing Entity in the Philippines, and also to
private lenders".
Nigeria has three Credit Bureaus the largest being CRC Credit Bureau. CRC has slowly built a formidable clientele-base and continues to grow its business beyond the traditional lending institutions such as commercial banks to more recently telecommunications companies. The company also provides credit scoring services to online digital platforms and other digital payment and settlement organizations.
The
other two credit bureaus are:
1. CR Services Credit Bureau Plc. and
2. XDS Credit Bureau Limited.
The three bureaus were licensed in 2008 and have
done business for over a decade building up formidable debtor data bases. CRC
in particular, has pushed pass early teething problems to build a robust
franchise and is rapidly expanding the credit scoring mandate beyond
traditional institutions. The two other
credit bureaus are equally building brand credibility but the market structure
is similar to the local cement business with three main competitors with one
competitor being dominant.
The credit bureau business as presently designed is
what economist call an "oligopoly" or
a market with few service providers, the market structure as represented allows
the business owners price their services higher than that of a more competitive
market arrangement but this would appear acceptable against the need to recover
from startup difficulties. As the business scale increases, pricing could be
expected to be incrementally lower or could rise at a much slower pace.
The three main things credit bureaus are mandated to do include the following:
Data submission is regulated with the use of the Common Data Template which was designed by the CBN, IFC and CBAN and launched in 2016. Data collected are in four categories:
Data submission is usually done at least once a month and updates are done anytime it is required.
Some data are not
available in the credit bureaus such as income or tax payment. The other
sources of data i.e. alternative data from non-financial organizations such as
Electricity distribution companies, cooperatives, multinationals, microfinance
institutions, real estate and pharmaceuticals are also collected.
There is a Dispute
Resolution mechanism to resolve issues at a stipulated time to ensure accurate
and updated information is readily available to stakeholders
The main products of the Credit Bureaus are the following:
The purposes of the Credit Reporting System are as follows:
Analysts observe that Credit
Bureaus facilitate ease of doing business by significantly improving access to
credit especially for the disadvantaged sectors of the economy - consumers and SMEs
The World Bank findings reveal that, with the introduction of credit bureaus:
Nigeria has also benefitted in many areas including:
Related Reports (PDF)
1. Download the Full PDF Report - Debtors Africa, May 13, 2020
2. Executive Summary PDF - Proshare, May 14, 2020
3. AMCON and Financial Services Debt Burden in Nigeria - Aug 17, 2018
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