Tanzania: Credit Bureau Gives Tips On Best Practices

IT has been over a year since Dun & Bradstreet Credit Bureau (T) LTD, a company that deals with Credit Reference Bureau, was licensed by the Bank of Tanzania to provide credit reference services.

In this interview with Staff Writer EVANS NG'INGO, the company's General Manager Adebowale Atobatele, talks about the company's progress since it officially started its operations in the country.

QUESTION: It has been over a year since your prelaunch workshop. Have there been any new developments?

ANSWER:We have made significant progress from the time that we had the workshop. Between then (April 2013) and now (November 2014) we have received a Licence to operate as a Credit Reference Bureau from the Bank of Tanzania and are now fully operational.

As you can see we have our offices and data centre fully set-up and equipped to global standard. In addition, we have made significant progress in building up a subscriber base made up of both regulated and nonregulated financial institutions.

Our subscribers are now able to access our data repository to get credit information reports which they use in appraising loan seekers with the aim of ascertaining their creditworthiness and determining the level of risk attached to lending them money. So, I would say that we are in a good place and things are getting better for us.

Q:How has the journey been so far? Were there any challenges and if so, what are they?

A: Well, to be honest the journey has not being entirely smooth. We did face some challenges - typical of any new venture in a developing economy like ours and we did overcome the challenges.

The major challenge however, was that of access to data in the quantity and to the quality standard that we require in order to operate at a scale that could be compared to what exists in most developed markets or at least other developing African economies where Credit Reference Bureaus have long been in existence.

Now, what made the challenge of access to the requisite data a bit difficult to deal with was that it was entirely out of our control; not because we did not have the technical and financial means to tackle it but mainly because it is the Bank of Tanzania that has the statutory responsibility and the powers to address such challenge.

The good news is, they did; and I would like to use this medium to express our gratitude to the Governor of the Bank of Tanzania Prof. Benno Ndulu, the Deputy Governor Banking Supervision Mr Lila Mkila, the Director of Banking Supervision Mr Kobello and all the officials of Directorate of Banking Supervision who played a role in ensuring that we have prompt and uninterrupted access to data from BOT's Credit Reference Data Bank as stipulated by the Credit Reference Data Bank Act of 2012. The Bank of Tanzania has been very supportive of us and we appreciate them.

Q:The level of awareness about the role of Credit Bureaus is still low. Why? And what can be done?

A: A lot of factors account for the low level of market awareness about credit bureaus and these factors include low promotional activities on the side of key stakeholders, low level of financial literacy and low usage of the Credit Reference Bureau by financial institutions.

These are just a few reasons. However, I will focus on that of low usage by financial institutions because financial institutions have direct interaction with the target audience. It is estimated that 17% (about 3.7million) of Tanzania's adult population has access to bank accounts.

If the figure is correct, we can as well estimate that there are about 4million 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.

Now, if the banks and financial institutions that grant credit make use of reports from Credit Bureau to assess the creditworthiness of their customers, they will at some point in the process of engaging the customers inform them that a report on their creditworthiness will or has been sourced from the credit bureau.

If this is done consistently, 4 million Tanzanians will overtime hear about the Credit Reference Bureau. Let us take this thought a step further.

If people know that a report on their credit behaviour (past and present) is considered anytime they apply for a loan, renew a facility or during a review of a bank's credit portfolio, they will naturally want to know how the report from the Credit Bureau influences the decision of the lender and what they need to do to maintain a good credit profile. So in effect, the use of Credit Bureaus by financial institutions and other lenders can significantly increase awareness about the functions and benefits of the Credit Bureau.

Q:What would you say are the critical success factors Credit Bureaus in Tanzania?

A:One critical success factor is the existence of a level playing field backed by a legal framework that is fair to all stakeholders. Another critical success factor is the existence of Unique Identifier of persons and companies. This is why we hope National I.D.

in Tanzania will be rolled out at a much faster pace. This however, does not mean that we are unable to match customer details accurately. In actual fact, based on our experience and the lessons learned from markets with similar complexities as Tanzania, we have customized our Credit Bureau System to fit local context such that it is absolutely easy to search for an individual or a company without including identification number as part of the search parameter.

This is because the matching algorithm of our Credit Reporting System functions perfectly with or without unique Identifier. Another critical success factor is the support and participation of all financial institutions and basically everyone who is involved in financial intermediation or who sells on credit. This will include the various co-operatives and retailers.

The support and involvement of Insurance Companies and Mobile Network Operators is also critical and I hope that they would understand that the existence of a Credit Bureau like Dun & Bradstreet offers to them benefits that they ordinarily would not be able to achieve if they worked alone. I must not forget to mention the importance of promoting global best practice in Credit Reporting.

This is something that we at Dun & Bradstreet have upheld from the inception of our operations here in Tanzania and it can be seen in the way we have set up our operations, our Data Centre, the quality of our Personnel and the quality and content of our Credit Information Reports. We hope that other stakeholders will do the same.

Q:What are some of the benefits that the Credit Bureau offers?

A:The Credit Bureau offers benefits to everyone. To the lender, we help sort bad borrowers from good ones; we help to save time spent on evaluating a borrower, reduce the cost of assessing a borrower and help the lenders price loans according to borrower risk as a result of the information we have provided.

To the borrowers, we enable them to monitor and improve their credit record and present them with a tool to negotiate interest rates that is if they have a good credit history. To the regulator, we serve as a means of encouraging responsible lending; we can provide comprehensive and constantly updated data on borrowers and lenders - this is useful for effective credit risk monitoring for the economy.

Finally, I would say that we are a good tool for economic growth and promoting easy access to credit. If people have a good credit report, they should be able to access loans at an interest rate that is fair.

Q:What would you say are the similarities between Tanzania and other countries where Dun & Bradstreet operates?

A:Within the context of the African market, one visible similarity between Tanzania and other countries where we operate is the fast-paced growth of all the economies (Tanzania, Ghana & Nigeria) which by extension is reflective of a vibrant financial sector.

In these markets there is emphasis on trade and trade finance though I will like to see more of consumer/retail finance so that more people can get easy access to credit and we can build a more inclusive and more vibrant middle class which results in a more vibrant economy.

In terms of differences, the use of credit reports is still not mandatory in Tanzania. In Nigeria for example, all loan applications must be accompanied by credit reports and this something that the regulator in that market takes very seriously particularly because it is one of the ways of checking reckless lending.

This is not to say that some banks have not made the use of credit reports a core part of their credit appraisal process. There are banks like CRDB, Azania Bank and Equity Bank just to mention a few, who by management or board directive have ensured that all their credit analysts have access to the Credit Bureau's repository.

Q:What distinguishes Dun & Bradstreet from other credit bureaus?

A:Dun & Bradstreet has been in existence since 1841. Very often, you would hear people ascribe words like Integrity, Credibility, Trustworthy, Ethics, Technology and Excellence to the Dun & Bradstreet brand. This is never a surprise because those words are reflective of what Dun & Bradstreet means to those who are familiar with the brand.

In fact for the sixth consecutive year, Dun & Bradstreet has been identified by Ethisphere Institute as one of the most ethical companies in the world. We are a company with a very strong reputation, we take our clients, partners and associates very seriously and we are committed to delivering excellence always.

Q:What should your subscribers expect going forward?

A: Subscribers to our Credit Reporting Service can expect the best credit reporting format in the market, the best, most efficient and userfriendly reporting technology; and when they depend on data, they can depend on Dun & Bradstreet for complete, accurate and actionable business information.