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Borrowers credit history to be recorded on smart cards
Publish Date: Apr 28, 2008
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By John Odyek and Paul Tentena

BORROWERS of money from banks and other financial institutions will be required to obtain smart cards with records of their loan repayments.

Sam Katwere, the director of communications at Bank of Uganda, said the borrowers would be issued with a financial card, which would have their fingerprints, name, number and photograph.

The borrowers will get their cards from CompuScan CRB Ltd, which was selected by Bank of Uganda in 2006 to build a Credit Reference Bureau. The firm is responsible for collecting loan information from financial institutions, securing, sorting and storing it on the cards.

“The Credit Reference Bureau is to disseminate information among regulated financial institutions and micro-deposit taking institutions. The card is an identification system, which uses biometrics to identify borrowers,” Katwere said during a media awareness seminar at the Imperial Royale Hotel, Kampala.

CompuScan is a subsidiary of South African- based CompuScan Information Technologies. It is initiating the first Credit Reference Bureau in East Africa.

The borrowers will present their cards while applying for loans, Katwere said.

Mike Malan, the managing director CompuScan, said licensed lenders would use card readers, scanners and cameras to read and verify the information stored in the cards.

Malan said information about the loan records would be obtained from licensed lenders.

However, borrowers are also allowed to refuse to have their data shared with the Credit Reference Bureau.

He said the absence of a Credit Reference Bureau partly explains why commercial banks charge high interest rates to cater for the risks.

“As institutions become more comfortable with lending based on the information presented to them, it is foreseen that new loan services such as larger loans without collateral could become normal,” Malan said.

“Information at the Credit Reference Bureau will also contribute significantly to the costs of screening loan applications by enabling the lender quickly separate the good borrowers from the poor payers. By reducing turnaround times, customers can experience fewer queues at branches,” he concluded.

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