Credit bureau to make lending easier
Dec 06, 2008
INTEREST rates on loans are expected to reduce following the launch of Uganda’s premier credit reference bureau (CRB), the central bank governor, Tumusiime Mutebile, has predicted.
By Sylvia Juuko
INTEREST rates on loans are expected to reduce following the launch of Uganda’s premier credit reference bureau (CRB), the central bank governor, Tumusiime Mutebile, has predicted.
“The risk of borrowing is part of what builds up interest rates. There is the cost of capital, risk premium and the influence of other factors in the market, which add up the cost. If one of these components reduces, the interest rates come down,†he said.
Mutebile said the CRB would improve the performance of the financial sector and stimulate economic development through making lending and borrowing easier, faster and cheaper.
“By addressing the problem of information asymmetries, the CRB will help increase volume of credit at a lower cost. That should stimulate economic growth,†he said at the launch of the bureau on Wednesday. “Collateral requirements will be streamlined, default rates will be reduced and ultimately loans will become cheaper,†Mutebile added.
He said financial institutions would be able to offer new products and competitive interest rates due to availability of information. “I want to assure the public that we consider confidentiality and privacy of information paramount.â€
CompuScan, a South African company, was contracted by the central bank to offer credit reference bureau services and implement a financial card system.
The governor said the absence of a CRB had been a setback to expansion of the volume of private sector credit.
“Up to now infrastructure for information has been non-existent. Therefore, the participating institutions have been continuously exposed to high credit risk on account of inadequate information on borrowers’ credit worthiness.â€
Mike Malan, the CompuScan managing director, said the company had collected three million loan records that were stored in the database. He said the CRB would confidentially collect, store and transform loan information into business intelligence, which would be used to make lending decisions.
“The sophisticated services in the risky market products that monitor increasing or decreasing risk of borrowers, include credit scoring solutions, and loan application processes but loan applications and credit decisions.â€
Reinhard Buchholz, the German ambassador, noted that high interest on government securities, budget deficit and low repayment rates were some of the problems dogging the financial sector.
“As long as it lasts, lower interest rates for common borrowers are difficult to obtain.
“Credit should not be subsidised because they distort and ruin the whole system,†he said.
INTEREST rates on loans are expected to reduce following the launch of Uganda’s premier credit reference bureau (CRB), the central bank governor, Tumusiime Mutebile, has predicted.
“The risk of borrowing is part of what builds up interest rates. There is the cost of capital, risk premium and the influence of other factors in the market, which add up the cost. If one of these components reduces, the interest rates come down,†he said.
Mutebile said the CRB would improve the performance of the financial sector and stimulate economic development through making lending and borrowing easier, faster and cheaper.
“By addressing the problem of information asymmetries, the CRB will help increase volume of credit at a lower cost. That should stimulate economic growth,†he said at the launch of the bureau on Wednesday. “Collateral requirements will be streamlined, default rates will be reduced and ultimately loans will become cheaper,†Mutebile added.
He said financial institutions would be able to offer new products and competitive interest rates due to availability of information. “I want to assure the public that we consider confidentiality and privacy of information paramount.â€
CompuScan, a South African company, was contracted by the central bank to offer credit reference bureau services and implement a financial card system.
The governor said the absence of a CRB had been a setback to expansion of the volume of private sector credit.
“Up to now infrastructure for information has been non-existent. Therefore, the participating institutions have been continuously exposed to high credit risk on account of inadequate information on borrowers’ credit worthiness.â€
Mike Malan, the CompuScan managing director, said the company had collected three million loan records that were stored in the database. He said the CRB would confidentially collect, store and transform loan information into business intelligence, which would be used to make lending decisions.
“The sophisticated services in the risky market products that monitor increasing or decreasing risk of borrowers, include credit scoring solutions, and loan application processes but loan applications and credit decisions.â€
Reinhard Buchholz, the German ambassador, noted that high interest on government securities, budget deficit and low repayment rates were some of the problems dogging the financial sector.
“As long as it lasts, lower interest rates for common borrowers are difficult to obtain.
“Credit should not be subsidised because they distort and ruin the whole system,†he said.