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Financial sector yet to share credit information

Saturday September 12 2015
bureau

Credit reference bureaus keep records of defaulters. PHOTO | FILE

East Africa’s financial sector regulators are faced with the headache of integrating regulations governing credit information sharing as they move to discourage cross-border movement of risky borrowers.

The credit reference bureaus (CRBs) in each of the five EAC countries are at different stages of development in terms of data providers and the nature of information to be shared.

The Central Bank of Kenya says that cross-border credit information sharing within East Africa is yet to begin, mainly due to the different legal requirements applying across member countries as well as operational constraints in cross-border data handling.

“In this regard, the Monetary Affairs Committee has tasked each EAC central bank to identify and initiate the legal reforms necessary to facilitate cross border CIS,” said CBK in an e-mail to The EastAfrican.

The implementation of CIS across the region is being pursued by the Monetary Affairs Committee of the EAC as part of the harmonisation of regional supervisory frameworks.

“Each of the national systems is at different stages and they have to arrive at a common level to enable them to integrate,” said Habil Olaka, chief executive of the Kenya Bankers Association.

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Kenya, Rwanda, Uganda and Tanzania all have private CRBs, while Burundi in 2012 established a government-owned bureau that was financed by the International Finance Corporation to the tune of $400,000.

Kenya is currently working on complete reporting of both positive and negative credit information on borrowers from commercial banks, deposit-taking microfinance institutions and the Higher Education Loans Board (Helb).

The country also plans to extend the coverage to borrowers from savings and credit co-operative societies and users of utilities such as water and electricity.

Rwanda went straight into full-fledged reporting of positive and negative information.

In Uganda, the Financial Institutions (Credit Reference Bureaus) Regulations, 2005 allow only banks and deposit-taking microfinance institutions to participate in credit information sharing.

In Tanzania, the law allows CRBs to collect information from banks and other financial institutions licensed by the Bank of Tanzania.

Credit bureaus also source data from other entities such as utility providers, phone companies, external debt collection agencies, public institutions such as the registrar of companies and the courts.

“The regional project would not be between individual subsidiaries of banks but would operate by linking the national mechanisms across the boundaries so that a CIS participant in Uganda can access the information from the Kenyan CIS system. This is the agenda that Kenya is pursuing,” said Mr Olaka.

Efforts to get comments from Bank of Uganda (BoU) were unsuccessful.

Sam Omukoko, chief executive of Kenya-based Metropol CRB, said negotiations are ongoing among the five banking regulators (Central Bank of Kenya, Bank of Uganda, Bank of Tanzania, Bank of Burundi and National Bank of Rwanda) “but it is not clear how far they have reached.”

Plans for harmonising credit information sharing practices in the EAC began during the first regional credit information sharing conference held in Nairobi in 2011.

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