Five years ago, Bank of Uganda selected Compuscan to establish a credit reference bureau and biometric identity smart card system
By John Odyek
Five years ago, Bank of Uganda selected Compuscan to establish a credit reference bureau and biometric identity smart card system. Since then, enormous strides have been made in the credit landscape. Uganda has seen credit become a significant contributor to the country’s economic growth.
Michael Malan, the managing director, Compuscan Uganda, says the biometric identification system implemented in Uganda is the first of its kind to be used by a credit bureau. “To create the system, we merged several wellknown technologies to create an identity card that could be used at every bank for secure identification and as the key indexing number within the credit bureau,” he explains.
Since its inception, Compuscan Uganda has issued over one million biometric identities with smart cards to Ugandan citizens. Following the successful establishment of the biometric identification system Compuscan has been invited to discuss this innovative success in numerous countries around the world. In addition, the case study of the biometric system in Uganda was published by the International Finance Corporation in the 2012 Credit Bureau Knowledge guide, as an international reference for countries considering how to tackle the issue surrounding the lack of a national identity whenestablishing a credit bureau.
Compuscan Uganda provides a much needed service in the formal financial sector by collecting information on how people borrow and repay their debt obligations. “We reduce the phenomena of multiplicity of borrowing by linking all debt to a common identifier.
This helps to prevent the consumers obtaining more loans than what they can afford,” says Malan. However, those borrowers that pay well and have good credit records are likely to get easier access to credit. In addition, since their establishment they have seen loan approval turnaround times getting faster in the country and moving between banks is now also possible.
Staff of Compuscan Uganda. The company has issued over one million biometric identities with smart cards to Ugandans. Photos by Kennedy Oryema
All data is stored centrally on the credit bureau so the history of good payments can easily be transferred. This facilitates the credit granting process and makes access to credit easier for consumers. Recently, Compuscan analysed its statistics and found that there has been a dramatic improvement in the overall state of credit in Uganda. While consumers are demanding more credit, lenders are responding by making more credit available.
Since the first quarter of 2012, there has been a 51% increase in the number of loans issued in Uganda with the majority of the growth being fuelled by Microfinance Deposit taking Institutions (MDIs) and commercial banks. Credit Institutions (CI) have contributed a 31% growth in lending volumes.
MDIs have contributed a 45% increase in lending volumes. Interestingly, women are getting more and better access to credit facilities within the country. Since the first quarter of 2013, there has been a 300% increase in loans granted to women between the ages of 18 and 25. There is an 86% increase in women aged 18 to 35 years. In addition, the youth, make up a significant portion of borrowers younger than 25 years in recent months.
Compuscan sees youth participation as a positive development as this is where the new economic agents will come from. Lenders who can nurture these customers can enjoy a profitable future banking relationship with them. The enhancement to Uganda’s credit information system has not gone unnoticed internationally.
The World Bank’s Doing Business Index states that the ease of getting credit has seen a significant improvement in recent years. Originally positioned at number 158 in 2008, in only five years Uganda’s rank has jumped to 40th out of 185 countries. Malan says the depth of credit information within the country previously ranked as 0 on a scale of 0-6, is now ranked at a level of 5.
This is a higher ranking than Kenya which currently holds the number 12 spot for the ease of getting credit. He says this improvement is a significant achievement and a key contributor to this is the achievement of their project along with the strong regulatory framework set by the Bank of Uganda. It has been a long journey and Compuscan is proud to have been a part of the lifting of the Uganda credit sector. “We look forward to the country’s future economic development that is sure to occur with the credit bureau strongly embedded in the financial sector,” Malan says.
Pride Microfinance Limited (MDI)
Equity Bank Uganda
FINCA (U) LTD
Compuscan improves Uganda’s loan system