Rwanda’s only credit reference bureau will from the end of this year start issuing credit scores to borrowers giving consumers an alternative tool to negotiate for cheaper loans.

The National Bank of Rwanda (BNR), in its latest monetary policy and financial statement, has disclosed that CRBAfrica Rwanda, will start issuing scores that will be used to assess a borrower’s creditworthiness.

BNR said that CRBAfrica, which is now known as Trans-Union Rwanda, is already sharing credit information with all mandatory participants including Banks, microfinance institutions (MFI), savings and credit co-operative societies (Saccos) and insurance companies.

“CRBAfrica, plans to offer a new product, credit scoring, a method of rating borrowers allowing lending institutions to access a customer’s creditworthiness, by December 2013,” said BNR.

Aimable Nkuranga, TransUnion’s country manager in Rwanda, said with credit information sharing, the need for collateral is reduced because financial institutions can use the past history of the borrower to determine what their future behaviour is likely to be.

“This coupled with the analytical solutions we will be introducing will minimise the need for applicants to provide collateral against the loan,” said Mr Nkuranga.

As at the end of June this year, 26,835 searches had been made by banks, 3,243 had been made by MFIs and Saccos; and 571 searches by 57 per cent of the government-supported Umurenge Saccos, which are all providing information to the credit reference bureau.

READ: Rwanda Saccos growth rate outstrips that of banks

BNR said that 44 searches have also been made by insurance companies, while 77 searches have been made by telecommunication companies.

Loans in the banking sector, which has nine commercial banks, three microfinance banks, one development bank and one co-operative bank, rose marginally by 5.47 per cent to Rwf788.2 billion ($1.2 billion) as at the end of June, from Rwf747.3 billion ($1.1 billion) as at the end of December 2012.

However, the non-performing loans ratio had deteriorated to 6.9 per cent by the end of June 2013 compared with 6.7 per cent and 5.8 per cent at the end of December and June 2012 respectively.

The introduction of additional tools to assess the credit worthiness of borrowers is expected to help reduce the incidence of defaults in the long term, which could lead to an improvement in the ratio of non-performing loans for banks and a reduction in the cost of credit for borrowers.

“A client with a high credit rating implies lower risk rating, thus better terms and conditions for any loan application,” said Maurice Toroitich, KCB Group Rwanda country manager.

With credit rating in place, analysts predict more lending to the private sector and a reduction in the level of non-performing loans from the current 6.9 per cent against the central bank target of 5 per cent.

BNR said that the remaining supported Umurenge Saccos, which are Saccos in each of the country’s administrative sectors, will start sharing credit information by the end of September.

Voluntary participants such as utility companies like the Energy, Water and Sanitation Authority and telecom companies like MTN and TIGO are sharing credit information regarding their clients.

This has seen the private credit bureau coverage by adult population increase to 17.2 per cent as at the end of June, from 12.8 per cent as at the end of December last year.