Credit-bureau hopeful promises system will mean fewer bad debts
Published:Wednesday | May 11, 2011 | 12:00 AM
A principal shareholder in Creditinfo Jamaica, one of the companies vying for a credit bureau licence in Jamaica, says other jurisdictions have seen as much as a 50 per cent decline in bad debts after establishing a credit bureau system.
Creditinfo Jamaica is owned 20 per cent by Creditinfo Group, a Germany-based credit-information and risk-management solutions company, and 41 per cent by Jamaican shareholders, including Damion Franklin, general manager of the local entity.
"It will bring about increased transparency, good business conduct and help customers," said Kristinn Agnarsson, business developer of CreditInfo Group, at a credit bureau seminar hosted jointly by his company and the Jamaica Chamber of Commerce in Kingston last Thursday.
"For example, a French bank in Ukraine we have been working with, where we introduced application processing and credit scoring, we saw some initial benefits with default rate in new loans decreasing by 25 per cent, three to four months after using credit-bureau data they saw up to a 50 per cent drop," added Paul Randal, general manager of Creditinfo Group.
"Credit-bureau data can dramatically change what obtains in a market," he said.
But the executives were not able to give specifics about the Jamaican market or an estimate of how much the delinquency rate in institutions here would likely decline.
Non-performing loans in the 13 deposit-taking financial institutions regulated by the Bank of Jamaica (BOJ) have more than doubled since the financial crisis, from J$9.8 billion in December 2008 to J$16.3 billion at December 2009 and J$22.4 billion at December 2010.
The commercial and merchant banks and building societies have reported that they are working with borrowers to clear outstanding debt.
The credit-bureau system is supposed to create a credit history on borrowers that serves as a more objective measure of their risk, but it also has a larger function in economic planning, says CreditInfo.
"Authorities can also use the statistics for decision making," said Agnarsson.
"Bureau data is not just about bad debts," he said.
still awaiting feedback
Creditinfo Jamaica put its bid in for a licence from the BOJ earlier this year, and is still awaiting feedback.
"It takes 120 days maximum for the application to be approved and we believe we have around 60 more days to wait for some words," said Franklin.
"The system is ready to be localised for the Jamaica environment, so all we have to do is to start the implementation."
CreditInfo, which already operates in 10 countries, including Czech Republic, Georgia, Romania, Greece and Malta, among others, said it would take nine to 12 months after the licence is granted to begin offering services to the Jamaican public.
Radek Bittner, project manager at Creditinfo Solutions, said the implementation process will go through at least four phases:
Three to four months to consult with providers of data, to analyse the scope of the data to be received, functionality of system, migration plan and description and design of statistical reporting;
Four months for system development, internal stress testing and building connectivity to subscribers;
About two months for customer testing; and
One to three months for a pilot run of the system and final acceptance test by financial institutions.
Critical to the whole process though, Bittner said, is that the correct and relevant data is received.
"Subscribers must be prepared to give the data," he said.