Credit bureau to bring initial 'pain, discomfort'

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Credit Bureau's creation could ultimately enable banks to release pent-up liquidity and improve their lending confidence, the Bahamas Institute of Chartered Accountants (BICA) president said yesterday.

Gowon Bowe, who hailed the Government's tabling of the enabling legislation on Wednesday as a positive step, acknowledged there would likely be some "pain and discomfort" in the initial stages of credit bureau implementation.

"The mere tabling of the Bill will require considerable debate but, more importantly, there is still a significant amount of work needed to get it implemented," Mr Bowe said. "The banks are well known but you do have credit financing via car sales, furniture sales, and you have number of those kinds of consumer finance businesses essentially not regulated by the Central Bank, although some of them are regulated by the Securities Commission.

"Most Bahamians nowadays are borrowing for personal loans.

"The application form is not telling the lender the level of debt that individual may have with other banks, furniture companies and car companies," Mr Bowe added.

"This will shine the spotlight on the over-leveraging of the average consumer in the Bahamas. We can go from anecdotal knowledge as to how over-leveraged persons are to empirical evidence. What it will do is effectively give the lending environment greater confidence in who they are lending to."

The Credit Reporting Bill 2017 establishes the framework for the Bahamas' first credit bureau, which will collect personal and financial information on persons and companies, then issue this to client lenders via a credit report. This enables the latter to better assess a potential borrower's creditworthiness and associated risk, helping the distribution of capital.

In the Bahamian context, a credit bureau should help borrowers improve their credit and payment behaviour, while lenders will have increased access to accurate and more comprehensive information about borrowers' credit history and payment habits. This, in turn, would reduce their exposure to risky loans. Credit bureau clients typically include banks, mortgage lenders, credit card firms and other financing companies.

Mr Bowe added of the credit bureau: "In reality it should release some of the built-up liquidity, because as persons demonstrate that they are quality borrowers then those persons should be eligible for loans as, right now, in the absence of salary decision authorisation from a reputable company, they are not able to get debt financing.

"We may be surprised because there may be only a handful of persons considered credit-worthy in the beginning.

"This is a positive development towards 21st century activity, but it will have some pain and discomfort in the initial implementation."