Government is currently working on a legal framework for establishing a credit reference bureau system in the country as it moves to expand the volume of private sector credit, a central bank official said on Wednesday.
BY TATIRA ZWINOIRA
The move comes after the Reserve Bank of Zimbabwe (RBZ) has already established a credit registry department which is a unit under the Bank Supervision Division.
A credit registry is an institution or agency that collects information from creditors and available public sources on a borrower’s credit history.
RBZ acting governor Charity Dhliwayo told a stakeholders’ conference on the setting-up of the credit reference that the central bank would handle the accreditation which will enable private credit bureaus to also collect or obtain information from financial institutions.
“The Ministry of Finance and Economic Development is at advanced stages working on the legal framework for establishing a credit reference bureau system in the country,” Dhliwayo said.
“The accreditation which shall be done by the Reserve Bank will enable private credit reference bureaus to also collect and/or obtain credit information from the financial institutions.”
Yesterday’s meeting was organised by RBZ in collaboration with the World Bank.
The registry will compile registry information on individuals and corporations such as information on credit repayment records, court judgments, and bankruptcies, and creates comprehensive credit reports that are availed to lenders or creditors.
Dhliwayo said RBZ had noted over the years that a poor credit culture was one of the inherent weaknesses in the proper functioning of the financial sector in Zimbabwe.
“The absence of a comprehensive credit reference environment in Zimbabwe has been a major bottleneck to the expansion of the volume of private sector credit,” she said.
“Banking institutions have continuously been exposed to high credit risk on account of inadequate information on borrowers’ creditworthiness. This has inevitably increased the cost of borrowing, thereby making credit more expensive than it would otherwise have been.”
The absence of a credit registry had resulted in multiple borrowers at a number of banking institutions thereby increasing chances of defaults.
The banking sector has suffered from high non-performing loans with the ratio at 15,19% as at March 31. This has raised fears that banks would cut back on lending critical in rebooting the economy.
Dhliwayo said requisite amendments to the Banking Act have been approved by Cabinet to cover operations of the credit registry and appropriate regulations for the licensing and operation of private credit bureaus.
“The Reserve Bank is also in the process of coordinating data providers as well as the private credit bureaus to work on the development of standard data templates to enable all data providers to submit data in standardised formats,” she said.