via Credit bureau registers 2,3 million customers – NewsDay Zimbabwe September 1, 2015 by Tatira Zwinoira
The country’s largest credit reference bureau, Financial Clearing Bureau (FCB), says it had 2,3 million customers on its database at the end of the second quarter of the year.
In a newsletter, FCB said its hit rate — that is the probability that FCB already has some information on a search — continued to improve, breaking through the 70% level for individuals and increasing to over 40% for companies.
It said the bad rate for searches on the FCB remained stable at 5,63% compared to 9,23% at the end of the third quarter of 2014.
“The combined “bad rate” for searches remained stable at 5,63% compared to 9,23% at the end of Q3 2014. However, the gender gap remains evident with the ratio of searches on men compared to women stuck at just over 2:1,” FCB said.
A credit registry is an institution or agency that collects information from creditors and available public sources on a borrower’s credit history.
FCB said the risk-based pricing, that is a methodology generally accepted and used by many credit providers world-wide, must be used by lenders to measure and off-set credit risk using interest rates and other related fees.
In a risk-based pricing scenario, the interest rate on a loan is determined not only by the cost of funds but also by the lender’s estimate of the probability that the borrower will default on the loan.
“A borrower who the lender thinks is less likely to default will be offered a better (lower) interest rate. The lender may consider a variety of factors in assessing the probability of default, such as the borrower’s credit score, or employment status,” the FCB said.
In Zimbabwe, the risk-based pricing ratio is still to be widely adopted. The system has been used by other developed countries such as the United States and the United Kingdom.
FCB was formed in 1990 and has serviced the financial services sector’s credit clearing and referencing needs in Zimbabwe.
Its membership is open to all types of credit providers as well as public and private sector companies that have need for vetting of customers, business partners, agents or staff.
Last month, the Reserve Bank of Zimbabwe deputy governor Charity Dhliwayo told a stakeholders’ conference on the setting-up of the credit reference that the central bank would handle the accreditation which would enable private credit bureaus to also collect or obtain information from financial institutions.
The credit registry is mandated with promoting efficient, timely and accurate credit information sharing, thereby enhancing credit risk management, governance systems and fostering credit discipline in the market.
The absence of a credit registry had resulted in multiple borrowers at a number of banking institutions, thereby increasing chances of defaults.
The banking sector has suffered from high non-performing loans with the ratio at 15,19% as at March 31.
This has raised fears that banks would cut back on lending critical to rebooting the economy.