This week: A second thought on Credit Reference services in Zambia

Kelvin ESIASA

By Kelvin Esaisa

The move by Bank of Zambia to review the credit reference services in Zambia is welcome. This initiative is overdue. This is because there are a number of weaknesses in the current set up of the credit reference services in Zambia.

Recently a colleague shared with me on how the private and public sector could be involved and benefit from the credit reference services in Zambia. He told me that many Zambian companies could benefit from credit reference services if they were able to register with the credit reference Bureau.

After the chat,  I had a second thought on the current operations of the credit reference service in Zambia. The chat reminded me the experience I had with the Credit Reference bureau in 2011. It took Bank of Zambia to sort out my case. After this experience, I thought that a lot should be done in order to make the credit reference bureau operate to expected standard.

It was also at this point that I leant that Credit reference bureau was a private enterprise which belonged to Credit Reference Bureau Africa. I also leant that CRB was not an agency for Bank of Zambia a thought I held for some time. I used to think CRB was an agency for Bank of Zambia. This is because the former Bank of Zambia Governor Dr. Caleb Fundanga was instrumental in the establishment of CRB. At one point, he even warned banks in Zambia of punitive action if they had not used the CRB in providing credit facilities.

According to the speech delivered by former Bank of Zambia Deputy Governor Operations Dr. Denny H Kalyalya the establishment of credit reference services in Zambia was after the Financial Sector Assessment Programme (FSAP), which was jointly undertaken by the World Bank and the International Monetary Fund in 2002.Dr. Kalyalya said FSAP identified poor credit culture as one of the inherent weaknesses in the proper functioning of the financial sector in Zambia. Dr.Kalyalya added that in order to improve credit culture in the country, the BoZ, with input from key stakeholders, developed and issued the Credit Data (Privacy) Code and the Credit Reference Services (Licensing) Guidelines to facilitate the establishment of credit reference bureaux (CRBs).

He further said that as BoZ was developing the guidelines, the Bankers Association of Zambia (BAZ) had also initiated the process of engaging a provider of credit reference services and after careful considerations BAZ identified Credit Reference Bureau Africa Limited (CRBAL) as the entity to provide credit references in services.
In 2006, Bank of Zambia drafted Credit Reference Services (Licensing) Guidelines which were aimed at guiding the operation of the credit reference agencies.

The guidelines stated that “Credit Data” meant any positive or negative data relating to a person obtained by a credit provider in the course of or in connection with the provision of credit, or any data obtained by or generated in the database of a Credit Reference Agency in the course of or in connection with the providing of credit reference services. It also defined that “Credit provider” meant any agency or entity that carries on a business involving the provision of credit to a person and included banks, money lenders and institution offering hire purchases.

The guidelines also defined Credit Reference Agency as any data user who carries on a business of providing a credit reference service. While Credit reference service meant the service of compiling and processing credit data relating to a person for disseminating such data and any data derived there from to a credit provider for credit purposes and, for performing any other functions directly related to credit transactions.

The current credit reference services are provided by Credit Reference Bureau Africa which is operating in eight countries in Africa.  There are a number of flaws in the currents services in the current credit references services. Borrowing from the experience I had with CRB verses Barclays where the two institutions held information that I had a loan from Barclays, and I had not serviced it. But this loan never existed, and the information was false. This case took the Bank of Zambia to step in and correct the records. There are other many Zambians that are faced with the same situation where there credit details are wrong but CRB host this information.  In the current set up, a credit reference agent acts as a data Manager where the CRA host only the information given to it and this information cannot be verified. So if the information imputed in the system is wrong then personal record is dented.

The other challenging situation is that the current CRA collect information through the third part even without the consent of the affected person. Besides this, the current CRA is foreign owned, and its future may not be as anticipated. In Zambia,  we have seen foreign institution folding their operation any time and at will. So, if CRB was to fold its operation now then the country t would be denied of credit reference services. Therefore, BoZ should speed up plans to set up a credit reference agency which would be public owned.

Therefore, I end by saying what the review of credit references service being done by central Bank deserve support from every Zambian.