The Credit Bureau.

Transcription

1 The Credit Bureau A

2 Establishment of the Credit Bureau As part of its aspirations to develop working mechanisms and related supervisory instruments to be in line with international best practices, and with technical assistance of the International Monetary Fund (IMF), the PMA undertook, at the beginning of 2006, a comprehensive evaluation process for credit bureaus of several emerging and developed countries. Afterwards, the PMA implemented the necessary measures to develop the credit bureau service infrastructure and officially launch it, on the 18 April, 2008 via the network which connects the PMA to banks and HFI S electronically 24 /7 through the Bureau s webpage to banks and micro finance institutions. 1

3 Credit Registry System Sijil-ly System Definition Sijil-ly system is a computerised database which collects demographic and financial data on borrowers and their guarantors. After correcting input technical errors, the system provides this information to banks and HFI S via a banking network. System Objectives To facilitate access to finance for all economic sectors, individuals and institutions alike, contributing to enhancing lending with low levels of risk. To provide the features of regarding all kinds of facilities, guarantors and collaterals collected on credit facilities To strengthen prudent credit risk management by lending parties To contribute improving livelihoods and the economic upliftment of the people To enhance the competence of the PMA, banks and lending institutions in managing risk and implementing Basel Committee Standards. 23% 2

4 Since the establishment of the Credit Bureau at the beginning of 2008 and with the participation of around 26 banks and HFI S, credit portfolio markedly increased at an annual growth rate of 23 percent.

5 Challenges versus Opportunities The Credit Registry System was created and developed internally by PMA staff. The development process faced several challenges, at the beginning, which were overcome by teamwork, coordination with participant banks and optimal use of success factors. Success Factors Challenges and Obstacles Completeness Management and coordination Accuracy Human resources Updated data IT Systems Disclosure of Data Technical support 4

6 Facts Demographic and financial data (positive and negative) Borrowers credit scoring Probability of default Risk grade Reason Code Status of Customer on Bounced Cheques System Customer behaviour (Mop) Conducted enquiries Collected collaterals Paid credits Court judgments Lease-financing companies data Retailers data+ Real estate developers data Online real time service 24/7 Enquiries about borrowers via the banking network. Response on enquiries (Credit Report) within mille second. Upload new credit lines via the banking network. Notification about new credit lines within minutes. Automated daily data updates High degree of security of banking network Data amendments daily basis. Available to more than 2500 users from banks and HFI S Hybrid system combining public and the private service. Non-manual operations protect Borrowers against overindebtedness risks protect Borrowers against high levels of Debt concentration. Extend credit Lines to be appropriate to borrowers needs and capabilities. Disclosure System Features Consumer s Protection Consumers Rights The PMA offers to the banking consumers, a copy of their credit reports, and allows them the option to disputation on to the data therein through PMAs consumers halls in Ramallah and Gaza or through any of the branches of banks and MFI S. A consumer is presented with a free copy of credit report once a year, compliant with relevant international practices.

7 System Benefits Economy Maintaining the stability of economic sectors Boosting investment activity Facilitate access to SME S and companies finance Improving citizens living standards Promoting economic growth Borrowers Protecting borrowers from over indebtedness. Facilitate access to finance. Reducing borrowing costs Facilitate financing corporate projects. Facilitate financing Micro, Small & Medium Enterprises (MSMEs) Banking and Financial Sector Expansion of borrowing Increasing profits Managing credit risks Enabling prompt credit decisions Reducing default ratio. Promoting competition among lending Parties. Limiting the phenomenon of cross lending from different lending Parties. Supervisory Maintaining financial stability Sustaining the safety and soundness of the banking system Prudent credit risk management. Promoting risk-based supervision Promoting indices and components of credit policy Creating a comprehensive and accurate financial and demographic database Meeting Basel Committee requirements in weighting credit risks

8 System Features A modern hybrid and easily customizable system satisfying the needs of users Automated service available 247/ to banks and HFI S (Micro finance institutions) User friendly system providing quick replies to enquiries Daily updating of borrowers and guarantors data. Comprehensive system providing data at the level of the single credits System disclosing negative and positive credit information System linked with the Bounced Cheques System System provides the Credit Scoring service for individual borrowers and companies. 7

9 Credit Scoring System System Definition The Credit Scoring System is a system which provides accurate estimates of credit risks posed by both the borrowers and their guarantors, depending on the available data stored in the Credit Registry. The system estimates the probability of default of borrowers over a specific period of time. The Credit Scoring System of the PMA is considered the only such system employed by central banks at the global level. System Objectives To mitigate credit risks To provide accurate assessments of current and future risks posed by borrowers to banks and HFI S To execute periodic assessments of the facilities portfolio in order to monitor credit risk To improve the likelihood of obtaining banking facilities, to facilitate access to finance. To reduce required collaterals and charged interest rates on facilities To enable prompt credit decisions. To promote competition among lending sources 8

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11 System Features Determination of Brower credit score with upper and lower limits of risk intensity Determination of the Borrower s probability of default over the coming 12 months Determination of Borrower risk grade measured against the credit risk average for the bank facilities portfolio Interpretation of the evaluation components and the risk grades Determination of the risk grade based on the Borrower s credit and personal current and historical data. Determination of risks posed by loan guarantors and customers in accordance with their corresponding rating by the Bounced Cheques System Adaptability of the system to any new data or developments Satisfaction of the requirements of the PMA, the lending parties and the Basel Committee on Banking Supervision Elements of the Credit Score Score Reason code Probability of Default Risk grade 10

12 Reasons for Success of the Credit Scoring System High level of accuracy of the Credit Registry System Comprehensive database Quick identification of credit risks Accurate selection of items in creating the system Compatibility of system outputs with the Palestinian banking environment 11

13 What did they say? You have succeeded in Finding a way to overcome major challenges in moving the PMA Credit Registry to best practice. My activities have taken me to twenty eight countries and the effort and determination of PMA officials has been exemplary and your success sets a high standard. I can say with confidence that in my experience your (PMA) registry is now the leader in the field, regionally Over a period of four years the PMACR has evolved to a point where it has been recognized as the leading public Credit Registry in the Arab World. It is only one of two public registries in the 65 public credit registries worldwide, that offers generic credit scoring to be used by banks, MFI s and the PMA Jim Aziz.Managing Director, Baja Group Consultants Credit Registry Advisor to the International Monetary Fund, World Bank. Asian Development.Bank and the United States Agency for International Development Undoubtedly, the Public Credit Registry of the Palestine Monetary Authority is one of the best Public Registries in the MENA region. Oscar Madeddu IFC Credit Bureau Advisor MENA Region 12

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