Supporting the development of national credit information bureaus and value added products

Sharing information on borrower credit histories allows lenders to improve their risk management and expand lending into new market segments.  The correlation between the existence of credit information registries and the depth of credit market is widely documented.  It is also agreed that the private sector is better suited to serve the needs of lenders by providing detailed credit history information and value added services, such as credit scoring, while public credit registries managed by bank supervisors (e.g., central banks) should focus on monitoring systemic risks.

In this respect, Experian has been more and more focused on supporting the creation of new credit bureaux in new territories as well as exploiting its credit scoring knowledge to develop Credit Bureau Score systems on existing credit bureaux.  

Among the most recent projects managed by Experian, it is worth mentioning the design and implementation of a Credit Bureau Score system for the Turkish Credit Bureau (KKB) and the consultancy and technical support provided to CreditChex, part of DCD Group in Pakistan, aimed at building a full credit bureau solution. CreditChex will be a full positive and negative data, privately-owned credit bureau serving both the banking and non-banking sectors. The configuration design tools deployed in the CreditChex solution will allow a rapid deployment of value added features like Credit Bureau Score and application fraud prevention.

The exercise made on behalf of KKB was of different nature, since we had to deal with a robust, successful, existing credit bureau operator, running the service in a mature market. KKB simply wanted to develop the Credit Bureau Score service to address the specific needs of the Turkish banking sector. The Credit Bureau Score has been developed to maximise the predictive power of all elements of KKB Credit Bureau, and condensed into a single measure of risk.

Another important development for Experian in emerging markets is its intention to apply for a licence to run a credit bureau in India, as part of its establishment of operations in the country. With a population of over 1.1billion, the credit bureau in India will help the economy and financial services sectors to grow fast, without the risk of defaults and bad debt losses on a huge scale.

On top of the support provided to private ventures on credit bureau initiatives, Experian has recognised that within the credit-referencing arena, there is a significant demand for data sharing in the small/micro finance sector. Here, the principal impediments to the provision of commercially viable financial services for small businesses are: lack of credit information and unreliability of financial information, high transaction costs and credit risks associated with small loan sizes, and informal sector constraints intrinsic to the micro and small business sector.  In light of this, Experian has now started a co-operation initiative with Planet Finance, an international NGO dedicated to reducing world poverty through the development of microfinance, to promote credit bureau projects in countries where microfinance is developed.

As far as emerging markets are concerned, one of the most important stumbling blocks in developing credit bureaux is a lack of understanding by financial institutions of the value and use of credit information. Considerable efforts are therefore necessary, to work with credit bureau users and operators to improve their understanding, systems and respective credit underwriting capabilities. 

Roberto Giannantoni - Credit Bureau & Fraud Services Director, Experian-Scorex EMEAI

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