credit infrastructurepubdocs.worldbank.org/en/394511553198994199/4bfeff646841310897227944453.pdf•...
TRANSCRIPT
Credit Infrastructure
Luz Maria Salamina
Lead Financial Sector Specialist
Finance, Competitiveness & Innovation Global Practice
World Bank Group
Agenda
• Why is Credit Infrastructure important for financial inclusion?
• Challenges/opportunities for public and private sector actors
• Potential actions to include in an NFIS
• Country case study
• Identifying and measuring outcomes
• Key technical resources
Why is Credit Infrastructure important for
financial inclusion?
CREDIT INFRASTRUCTURE
Enablers of a Responsible Credit System …
Credit Information
Collateral Registry
Insolvency/ Debt
Resolution
Unique Identity
Systems
Consumer’s rights
&Financial Literacy /
Consumer awareness
..have an impact on Financial Inclusion
5
“The priority reform measures are:
1. Improvements of the credit reporting framework for SMEs
2. Reforms that allow banks and non-banks to lend to SMEs
against movable collateral
3. Insolvency reforms”
Joint Action Plan on SME Financing – page 2
Challenges and opportunities for public and
private sector actors
Credit information – market failures & challenges
7
Lower cost of credit, thus increase access to credit
Reduce information asymmetries
Improve borrower discipline / prevent over indebtedness
Support bank supervision and credit risk monitoring
• Information asymmetries
• High cost
• High levels of NPLs
• Restrictive regulations (caps, negative only, defined set of collateral)
• Discriminating factors from digital solutions
• Consumer protection
• Lack of knowledge / awareness
Secured transactions – market failures & challenges
8
Mismatch
between assets
owned by
companies and
collateral
required by
Financial
Institutions
Challenges in the digital economy
10
• verifying identities especially
from social networks
• multiple fragmented data
sources which are difficult to
collate and aggregate
• completeness and timeliness
of data
• lack of digitized data due to
minimal usage of digital
platforms
• absence of enabling legal and
regulatory framework on data
privacy, and cross border
information sharing
• unintended side effects such
as potential for discrimination
• opaqueness of tools used in
credit such as scoring
methodologies.
• Over-indebtedness
Potential actions to include in an NFIS
Credit information actions to strengthen an NFIS
12
• Promote credit information
systems: laws and
regulations to license
institutions with adequate
governance and processes,
respectful of consumer
rights.
• Unique ID Systems
• Strategy to include
alternative data
sources(telcos,
municipalities, digital
services)
• Credit providers use the
tools for credit decisions, risk
monitoring, risk based pricing
– compliance
• Regulatory oversight by
qualified supervisors –
capacity building
• Promote awareness and
literacy campaigns to inform
consumers of their rights and
responsibilities.
Quick wins for the digital economy
13
• Define country context of
alternative data.
• Legal reforms to promote
usage of alternative data
and safeguards for
protecting consumers.
• Promote the use of digital
platforms.
• Piloting and testing the
use of alternative data and
credit scoring in controlled
environment.
• Capacity building
• Consumer awareness and
literacy.
Adoption of
alternative data
will go a long
way in
promoting
inclusion of
marginalized
groups of
societies
Collateral registry actions to strengthen an NFIS
14
• Centralized on-line access
• For all types of security
interests in movables &
functional equivalents
• Registration by creditors
• Notice based registry (no
documentation)
• Public search available to all
• Reasonable flat fees
Country case studies
Impact from Insolvency
16
Latvia:
Recovery rates by creditors from insolvent firms increased
71% within five years post-reform.
Mauritius:
Recovery rates by creditors from insolvent firms increased
17% within two years post-reform.
Moldova:
Recovery rates by creditors from insolvent firms increased
10% within three years post-reform.
Mexico:
Recovery rate for secured creditors from 19cents to 32
cents. Time reduced from 7.8 to 2.3 yrs
The case
of
ECUADOR
From 2006
Project SERVIR
• Sierra Central of Ecuador
• Rural area / difficult access
• High level of poverty
• Underserved by regulated lenders
• 100+ small MFIs
MFIS, Cooperatives, NGOs
DID NOT BELIEVE IN CREDIT REPORTING
MSME
• Indigenous, and poor
• 80% rural, 15% urban marginal, 5% urban
• Small producers, small farmers
• MFIs had good growth…☺
0
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
2005 2006 2007 2008
MFI total loans outstanding (US$ mn)
Microcredit loans
How to
convince
the MFI to
use CRB
MFIs
motivated
by
Regulator
• CRB collected data from MFIs and compared the data base against all credit providers in the DB.
0
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
700,000,000
800,000,000
900,000,000
2005 2006 2007 2008
MFI total loans outstanding + credit cards (US$ mn)
Microcredit loans Credit card utilized Credit card approvedCredit line authorizedCredit line usedMFI Loans
MFI borrowers with loans at other institutions
RESULTS FROM USING CRB
Game
changer…
• 33.65% increase in clients to MFI• 53% increase MFI portfolio• NPL decreased 2%• 90% of credit decisions supported
by credit information from bureau
Identifying & measuring outcomes
• Number of individuals and
firms reported
• % of adults reported to the
database.
• Indicators:
– Data on individuals
and consumers
– Positive and
negative
– Alternative data
– Historical (min2 yrs)
– Of all amounts
– Right to access own
data
– Online access
– Value added (score)
24
Doing Business indicators
• Recovery rate (cts. to $)
• Time (years) recovery
• Cost (% of the estate)
• Strength of insolvency
regimes (16):
– Commencement of
proceedings (3)
– Management of
Debtors Assets (6)
– Reorganization
Proceedings index
(3)
– Creditor
participation index
(4)
Credit Information
8 indicators and coverage
• Rights of borrowers and
lenders (10)
– Legal framework
– Collateral registry
with electronic
database
– Online searches by
any interested
• Protection of secured
creditors (2)
– Secured creditors
can sell the
collateral through
public auction or
private tender or
keep the asset
Secured Transactions
12 indicators
Insolvency and Debt
Resolution
16 indicators
Depth of information ranking – 8 indicators
25
%
Coverage
Accessibility of information
2/8
Quality and Depth of Information reported
6/8
Min
5%
• The law establishes that borrowers can inspect their data in the bureau.
• On line access to credit information
• Information on consumers and companies
• Information of all type of data (retailers)
• Positive and negative information
• Historical Data for more than 5 years
• Credit s of all amounts
• Credit Scoring
100%• % (adult population)
New
New
Regional benchmarking
26
DEPTH OF CREDIT INFORMATION
INDEX (0-8)
CREDIT BUREAU COVERAGE
Key technical resources
World Bank Group
28
Technical Assistance Program
Research & KS
→ Knowledge sharing / Study
tours
→ Conferences
→ Industry and country
assessments and monitor
Standards
→ ICCR
→ UNIDROIT
→ INSOL
Global Practice
Key Resources for Credit Information
29
ICCR – General Principles for Credit Reporting
30
The objective is to have a systematically designed guideline for the various stakeholders in
dealing with the challenges associated with implementing and operating a credit reporting
system.
GP1 DATA
→ Relevant
→ Accurate
→ Timely
→ Sufficient
→ Positive and
negative
→ For sufficient
time to make
history
GP2
SECURITY
→ Rigorous
standards
→ Documented
access
policies
→ System
availability
GP3
GOVERNANCE
→ Accountability
→ Transparency
→ Fair access to
information by all
users
GP4 LEGAL
→ Clear
→ Predictable
→ Non
discriminate
→ Proportionate
→ Supportive
consumer
rights
GP 5 CROSS
BORDER
→ Data transfer
should be
facilitated when
appropriate with
adequate
requirements and
authorizations in
place
CEOCORE BUSINESS OF CREDIT BUREAUS BOD REGULATOR
INTL.
AGREEMENTS
Policy recommendation for alternative data
31
IMPROVING AVAILABILITY AND ACCURACY OF INFORMATION
EXPANDING CREDIT INFORMATION SHARING
ENABLING RESPONSIBLE CROSS BORDER DATA EXCHANGES
BALANCING INTEGRITY, INNOVATION AND COMPETITION
• Adoption of unique identifiers
• Promote digitization of Public information
• Open data systems and standards
• Promote use of digital platforms
• Digitization of government services
• Regulatory reforms for fintech lenders
and expand information sharing to NBFIs
• Assess credit registries new role
• Assess reporting thresholds
• Cross border collaboration
• Harmonization of data protection and
privacy laws
• Consideration of regulatory sandboxes
• Promoting risk based pricing
Thank you!
Questions?