Information gaps widen lending risks, credit bureau warns
Mbongeni Mguni | Friday December 13, 2019 13:40
TransUnion, the main credit bureau in Botswana, has warned that the use of data to make credit decisions in Botswana is fairly underdeveloped in comparison to other African countries.
“Data sharing should be broadened to not only include data from lenders, but also insurance, telecommunications, retail and any other entities that provide goods and services to consumers so as to obtain a more comprehensive view of a consumer’s financial commitments,” TransUnion Africa acting country manager, Kabelo Ramaselwana told BusinessWeek.
He added: “In our view, the Botswana Credit Information Act should be approved, and all financial institutions should be compelled to share data within a regulated environment.” Individual borrowers owed commercial banks P38.5 billion by the end of September 2019, while in 2018, the Non-Bank Financial Institutions Regulatory Authority estimates that Batswana paid P5.4 billion in insurance premiums.
Other commitments such as hire purchase, store credit, union loans and those to the informal sector, are generally unknown, leaving an unclear credit profile for most borrowers. The situation, analysts say, has driven individual over-indebtednesses, the “zero-net pay” phenomenon and rising Non-Performing Loans amongst commercial banks.
Ramaselwana said full sharing of credit information was required across the various financial sectors.
“Non-credit data such as utility, burial society and even housing data, enable lenders to make better informed decisions when extending credit to consumers,” he said. “It will also allow consumers who have traditionally not been very credit active to build up a profile and be able to access the formal lending market.”
He welcomed recent proposals by the Bank of Botswana for a credit information repository that would provide real-time information. The central bank is also spearheading the Credit Information Bill that will improve “both positive and negative financial information and increase access to credit which is extended to small businesses and citizens”.
“We see this as a positive development that has the potential to assist in risk management, data driven strategies and providing a comprehensive view of consumer payment behaviour,” Ramaselwana said.
He added: “Inconsistent data quality means that the industry as a whole is at a disadvantage when it comes to making decisions. “This leads to greater risk in decision-making, which leads to increased cost of credit as credit providers price for this risk. “By getting access to more comprehensive data and better insights, businesses can better understand consumers, and thus provide better services and offerings.”