Regional credit bureau idea mooted

July 15, 2009 06:12:27 PM

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The establishment of a regional credit bureau could improve access to credit and other financial services for people in the Pacific who are currently underserved by financial institutions, says the International Finance Corporation (IFC). 

It mooted the idea in light of issues being discussed at the Pacific Microfinance week, currently underway in Nadi.

“Credit bureaus are essential to creating sound financial infrastructure that enables lending to a significant share of the population.

“They support the retail lending business by providing objective information on the credit worthiness of individual customers or small business,” said Peter Sheerin, IFC’s Credit Bureau and Risk Management Advisor.
 
“This allows lenders to make faster and more accurate decisions, thereby lowering their default rates and increasing their credit lending volume.

“Research has shown that full information sharing improves credit granting as it decreases processing time, operational costs and the likelihood of defaults. In the case of a regional credit bureau these benefits would be maximized even more,” he added.

Sheerin said the development of this regional Pacific credit bureau would need to include both negative and positive reporting.

“Negative credit reporting sets a negative bias towards granting credit privileges and limits the provision of credit to otherwise promising and credit worthy enterprises. A positive reporting method based upon balance sheet, inventory, cash flow and other financial measures will allow for a more complete profile of the client’s history.

“Positive credit reporting has proven to increase access to credit by promoting less discriminatory lending practices,” Sheerin said.

Meanwhile, Australian Parliamentary Secretary for International Development Assistance, Bob McMullan yesterday revealed Australia’s increased commitment to the development of microfinance in the Pacific.

Speaking to delegates via a video address at the Pacific Microfinance Week, McMullan the Australian government’s Aid Programme (AusAID) was upscaling its involvement in the area of microfinance and over the next few years would double its microfinance budget from $10 million dollars to $20 million dollars a year.

“The beauty of microfinance is that it gives people opportunities that they are denied otherwise,” he said. 

AusAID, he added, would continue to work with partners to help improve financial literacy.

“Your countries still receive a lot of money in remittances – even though the global recession is slowing down the flow for the moment. It’s important that people know how to use formal systems to transfer money in the most cost-effective way.

“And more generally it’s important that people understand their rights and responsibilities when it comes to banking and financial services,” he said.