NATIONAL BANK OF RWANDA
PRESS RELEASE Kigali, 31st May 2010
RWANDA IMPLEMENTS THE CREDIT INFORMATION SYSTEM
The National Bank of Rwanda – BNR has succeeded in implementing key credit information reforms and systems to meet the 2011 World Bank’s Doing Business “Access to Credit” indicators.
Lack of credit information system in Rwanda has been one of the factors limiting access to credit. Small firms and individuals borrow at high rates because of the high risk involved as lenders do not have information on their credit behavior. There is usually disparity of knowledge (information asymmetry) between the lender and the borrower about the past repayment behavior and the current level of debt known as moral hazard. This usually makes lenders more vulnerable. The high non-performing rates in the banking and microfinance institutions are proof that lenders lack credible credit information on the borrowers.
The credit information system will mainly serve but not limited to all banks, microfinance institutions and other credit institutions operating in Rwanda. The main objective of the credit reference system is therefore to encourage a culture of responsible credit behavior in the financial system, synchronizes information on clients allowing participating institutions to access rapidly and with ease prospective clients’ credit history. As such, access to individual or company’s credit history will reduce incidences of institutions lending to habitual defaulters, while rewarding borrowers with good repayment history to continue accessing credit facilities at improved conditions. The National Bank of Rwanda anticipates that this will not only increase access to credit in the economy but also reduce interest rates in the long run.
To achieve this progress, the National Bank of Rwanda (NBR) has worked in partnership with private and public sector institutions, notably the Association of Banks – Rwanda (ABR), Microfinance Institutions of Rwanda (AMIR), Insurance Companies (ASSAR), Rwanda Development Board-RDB, with technical support from the United States Agency for International Development -USAID.
Rwanda now has in place a comprehensive legal framework that regulates the establishment and operation of credit information system. The Credit Information System Law (CIS law) assigns the National Bank of Rwanda, the role of licensing and supervising private credit reference bureaus. The CIS Law protects the privacy of consumers who can decide not to have their credit history shared with the licensed credit bureaus, and requires lenders and creditors to be responsible for reporting accurate and complete information, both positive and negative, on the level of debt and the payment habits of clients. The CIS Law also requires that new credit applicants provide written approval to the creditor for it to obtain a credit reference report and to provide credit information to the credit reference bureaus. The consumer also has a right to access and dispute any wrong information recorded in the credit report. Credit reference reports are confidential and can only be used for specific purposes, mostly credit related.
The BNR’s own Credit Register has rolled out updated credit risk reports available to the financial system, meeting all Doing Business requirements: positive and negative credit information, present and past historical records going back 7 years; data on loans of all sizes; payment history for the entire financial system.
The newly licensed private credit reference bureau, CRB Africa, is now offering credit reports on demand. All banks, insurers, the 9 largest MFIs, telecoms and other creditors have joined as data providers and subscribers. CRB Africa in Rwanda is well known for its credit reference services across a section of countries in Africa.
To a greater extent, the functioning of the credit information system will; promote a sound, stable financial system in the country; improve the moral hazard behavior; build a credit culture in Rwanda (paying debts as agreed to), thus reducing loan delinquencies and write-offs; reduce lending risks, lowering the credit granting costs, and easing the collection burden which in turn will improve lender profitability and expand lending at lower interest rates. The system will also increase international & local investors’ confidence given credit risk management systems in the economy.
The National Bank of Rwanda has confidence in the operations of the credit information system that has been implemented and therefore urges the general public to embrace the new system by participating in the sharing of information to fulfill the national objectives.
Francois KANIMBA
Governor