Building a Private Credit Bureau (PCB) Miguel Llenas Dun & Bradstreet Rabat September, 2014 Session 3

Transcription

1 Building a Private Credit Bureau (PCB) Miguel Llenas Dun & Bradstreet Rabat September, 2014 Session 3

2 Does your economy really need a PCB? Well, your morals seem to check out. Now we just need to run your credit report It was so romantic He got down on one knee, showed me the ring and proposed right after we exchanged credit reports What is the definition of a PCB in today s world?

3 Does your economy really need a PCB? Is there a credit bureau law in the country? Does your law allow a PCB? What is the regulatory and legal framework? Does your regulator desire a PCB? Is there a public credit registry that exists? Are the banks mandated to submit data/ use the services of the PCB? Do local banks support data sharing? What is the size of the population? What is the bankable population? Do people in the country depend on credit? What is the investment required?

4 Establishing a Private Credit Bureau Post Implementation Support Establish a Credit Bureau Central Bank, Regulators & Legal Framework Product Configuration Feasibility Study/ Business Plan Hardware Procurement and Software Deployment Liaison with Data Providers Operations Recruitment & Training

5 Private Credit Bureaus & Central Banks 1. The reasons for establishing a PCB - Pushed or Pulled? 2. The unavoidable tension? 3. From lack of supervision to extreme control? 4. Licensing requirements - liberal or stringent? 5. Flow of Data - Central Bank involvement? 6. Case studies A country in Latin America A country in Middle East A country in Africa

6 Ownership & Shareholding Private Investors Banks Telecommunication companies Insurance providers Individual investors Other Investors Regulatory bodies Credit Bureau companies Discussion: Different shareholding regulations

7 Data Providers & Data Availability Dominican Republic Model Data Providers (Regulated Data) Central Regulator Banks Banks Consumer Finance MFIs Private Credit Bureau Consumer Finance MFIs Telecoms Telecoms Supplier Creditors Supplier Creditors (Fragmented Data) (Comprehensive Data)

8 Data Providers & Data Availability Ecuador Model Data Providers Banks Banks Consumer Finance (Regulated Data) Regulator Private Credit Bureau Consumer Finance MFIs MFIs Telecoms Telecoms Supplier Creditors (Non-Regulated Data) (Fragmented Data) (Comprehensive Data) Supplier Creditors

9 Data Availability Challenges Process of data submission. Non availability or incorrect identifiers to recognize a borrower distinctively. Non standardized capturing / storing of borrower names. Outdated information. Incorrect mapping of data elements in data extraction process. Complete Correct Current Consistent Coverage of the data. Does the data cover all of the aspects required for decision making? Accuracy of the data. Does the data correctly describe the purpose? Latest data. Does the data reflect the most up to date status? Dependable data. Does the data attributes together provide a consistent picture?

10 Technology 1. Strong, flexible and expandable system 2. Software Open systems, SQL, Oracle, etc. Java versus.net Other issues such as Business Intelligence (BIs) 3. Credit bureau technology platform Front office & back-office concept High processing speed High dissemination speed from data provider Providing data as-it-is format What are the standards today in report rendering & processing time? 4. Data security High security standards in data storage & data handling Can encryption play a role

11 Is the there a perfect model? Discussion Case: Credit Reporting in Dominican Republic 1. Central Bank was not involved from the beginning. Only a simple and powerful license. It was a private company! 2. Strong support form the Government since day Business plan was not designed only thinking about banks and elite companies. 4. Technology was the Higher Ground. 5. True concept of partnership with the financial sector.

12 Developing your own PCB? A few points to consider How to cope and fulfil the licensing requirements? How to deal with company incorporation, shareholding pattern, ownership? How to manage issues with data providers / lenders, product configuration, data availability? What needs to be considered as for hardware / software configuration, technology platform, telecommunications, data security? And finally the financial aspect: how to prepare a sound business plan with revenue and cost calculation, a 5- year operational budget and other related documents?

13 Business Plan Outline of a typical Business Plan: 1. Market Opportunity for a Private Credit Bureau Prerequisites for credit bureau development 2. Country s Economy and Financial Situation Political Situation Demographics Economy Banking and Lending 3. Feasibility of a Credit Bureau in Ghana Legal Framework 4. Opportunities and Challenges

14 Business Plan 5. Ownership and Governance of the Credit Bureau Any Restrictions on Ownership (Local Ownership or Sector Ownership) Regulatory Supervision Legal Framework Operational Guidelines Credit Bureau Law 7. Project Milestones, Phases and Timelines 8. Company Strategic Mission 9. Company Business Model and Assumptions 10. Credit Bureau Establishment & Operational Cost Components 11. Financial Projections

15 The Components of a Financial Plan include A Financial Plan should include, but not necessarily be limited to, the following 3 Financial Statements: Income Statement Financial Statements Balance Sheet Cash Flow Statement

16 The Financial Statements In order to prepare the Financial Statements, you would need to first collect and determine some key Financial Data You will need to determine the Business expenses. There are 2 categories of Business Expenses to consider. These are: 1. Start Up Expenses 2. Operating Expenses You will also need to determine the: 1. Business Projected Sales and Revenue

17 Group Activity List as many of the expenses associated with the establishment and operations of a Private Credit Bureau, categorising them into the 2 types of expense mentioned: Start Up Expenses Operating Expenses

18 The Business Expenses - Startup Expenses The following are examples of Start Up Expenses for a typical Private Credit Bureau: Business Registration Fees Business Licensing And Permits Rent Deposits Down Payments On Property Utility Set Up Fees Office Furniture Credit Bureau Solution Technology Hardware and Software Credit Bureau Software Consulting Services Others???

19 The Business Expenses - Startup Expenses A large portion of the Start Up Expenses will be for the Credit Bureau Solution. Some considerations for this are: Provision costs for a Primary and Backup site to ensure continuity of Business Operations Provision for redundancy on Connectivity Lines to ensure continuity of Business Operations Provision for Sufficient Business and Domain Consulting Services Provision for Sufficient Business and Domain Training Services

20 The Business Expenses - Operating Expenses The following are examples of Operating Expenses for a typical Private Credit Bureau: Salaries Rent Or Mortgage Payments Telecommunications Utilities Marketing and Promotion Loan Payments Office Supplies Insurance Credit Bureau System Support and Maintenance Annual Credit Bureau Software License Fees (if any) Others???