An international survey, researched and published by The World Bank on the ease of doing business, released on 4 November 2010, has found that for individuals, entrepreneurs, and medium sized companies it is becoming easier to get credit in Uganda.

Uganda has been ranked against its peers in 183 countries around the world and is now in a very admirable position of 46th in the world in terms of the ease of getting credit. This is in comparison to the previous year position of 109th.

The Doing Business 2011 : Making a Difference for Entrepreneurs report analyses various aspects of the credit environment in terms of the legal strength of the country, the type and depth of data held at the credit bureau and how the credit reports being compiled can assist borrowers to get credit. Aspects of a borrower’s legal rights in terms of credit are analysed and the amount of information held on the credit bureau comes into play.

A part of the report focuses on which credit grantors in an economy provide data to the credit registry files and scores or points are awarded to a country where full market inclusion credit information is shared. In Uganda full market level credit information data sharing has not yet been achieved and currently only banks provide data to the credit bureau. The Doing Business report shows that the credit bureau coverage sits at 1.1% of adults. This is in line with the fact that Uganda’s largest borrowing sector, the MFI sector, has initially been excluded from the credit bureau project. Additionally utility providers, telecommunication companies with post paid contract services, and trade creditors are presently not benefitting from the bureau services through sharing or using credit data. Early round positive discussions have already been held with Bank of Uganda, the Regulator of Credit Bureau Services in Uganda, to consider broadening the depth of data that can be shared at the credit bureau, and to widen the net of who could access the information, for the eventual benefit of the economy, the lender and eventually the borrower. Broadening this base would certainly enable further improvements in Uganda’s country rating, and indeed the usefulness of credit information.

Uganda moves significantly ahead in Sub Saharan Africa, and stays well up in EAC.

Still in the specific area of Getting Credit, has improved its ranking by 63 places to now be well ahead in the Sub Saharan Africa rankings. Uganda is now ranked 6th overall in Sub- Saharan Africa in the Getting Credit category. Of the economies in the East African Community Uganda is ranked 3rd with an unchanged position from the previous doing business report. This is measured against the significant changes that continue to take place in Rwanda and Kenya’s formidable overall ranking of second, in Sub Saharan Africa. (The country with the highest ranking is held by South Africa).

Achieving Uganda’s success in the Doing Business 2011 – The Top Reasons

The key reasons contributing to the overall improvement in rankings for Uganda have been as follows:

• The foresight, leadership and direction of the Bank of Uganda in creating a framework for the establishment of a regulated credit bureau in 2004 and 2005 and in overseeing the project’s successful implementation
• The selection of Compuscan as a world class provider of Private Credit Bureau Services in Africa to deliver Uganda’s first commercial and consumer credit bureau
• The funding and technical assistance, directed towards the financial institutions, made available by the project’s development partners with specific reference to the German Development Co-operation of Uganda and the World Bank through the Private Sector Foundation of Uganda
• The implementation of the Financial Card system in Uganda to identify borrowers uniquely through Biometric Technologies and ensure credit records once loaded can be linked to provide comprehensive credit reports
• The investment, effort and endurance from all the staff of all the Commercial Banks, Credit Institutions, and Micro Finance Deposit Taking Institutions (MDI’s)
• The support of the media in assisting the stakeholders to drive the message home that credit is beneficial if managed properly and that economies can do better and can grow with the right infrastructure in place
• The Ugandan public at large who have wholeheartedly supported the establishment of the credit bureau by working with the lenders of this country to be properly identified and who have given their consent and permission to allow their data to be shared to enable the building of the positive repayment credit history database

Compuscan In Uganda

In Uganda Compuscan collects and loads data to the credit bureau on all active and written off loans and credit facilities from all regulated deposit taking institutions in Uganda. This encompasses the borrowing customers of twenty eight Commercial Banks, Credit Institutions and MDI’s, that use the credit bureau and financial card system deployed at over 500 branch and head office outlets across the country . Compuscan provides on-site training and support to all branches and have specialized and trained staff spread across the regions of the country at all times. If a lende is in a town or village or parish anywhere in the Pearl of Africa then Compuscan is there to provide training and support on the use of the credit bureau system.

The Financial Card

Critical to the success of the credit bureau has been the issuing (and take up) of the Financial Card in Uganda. The financial card is a form of identification that uses biometric (fingerprint) identification to recognize a person who presents their card. Once a person is enrolled on the financial card system a unique number is generated and matched to the biometric images recorded The card itself is a smart card that contains a memory chip which stores information about the borrower (name and identity number details) as well as the fingerprints. It has become a central bank regulation that a borrower (individual or company)must obtain their financial card when applying for a loan, and this has helped spur the momentum related to the growth in numbers of borrowers that have already obtained their individual cards. Compuscan reports that more than 430,000 cards have been issued to borrowers and non borrowers alike. In certain cases lenders have enabled customers to get cards now so that as the banking relationship develops the compliance part of the necessary requirements for getting a loan will already be dispensed with and business can be conducted faster and more efficiently.

Reporting Positive Data to the Credit Bureau – An advanced approach in Uganda

Participating Institutions that are involved in the project must also, under the regulations, report positive and negative data to Compuscan. The sharing of both sets of data is an advanced credit bureau reporting dimension that is more commonly being seen and assist in ensuring the full picture of affordability and debt exposure are reported on, paying attention to the rights of borrowers need to “tell the full story”. The information pertains to records where payments have been made successfully on loans and facilities and where payments have not been made. A number of credit bureaus in developed economies are still not receiving positive data from credit grantors. Amongst these are France and Australia. This means that borrowers who defaulted, but may have subsequently recovered and are paying well on other loans, are not afforded the opportunity to have that data reflected. In a time of the recovery of the global financial crisis, the sharing of positive data is more important than ever. Positive data has the advantage that a borrower’s good record of repaying debt can be accurately stored and reported on and relied on as a true reference of the past. When applying for credit, it is important for lenders to know if debt was well paid, not only if it was not. In Uganda, with the advantage of being able to “leapfrog” those with hard earned learnings, Compuscan has delivered its credit bureau by collecting and storing both positive and negative repayment information covering information on loan repayments from individuals, SMME’s, and large scale corporate borrowers. With this Ugandans will have the advantage of sharing their data to the bureau and building strong reputational collateral credit profile reports no matter the size of the loan. Through the credit bureau collecting and storing positive data all borrowers can benefit by the good history that is developed over time.

31 trillion UGX in loans processed through Compuscan’s Credit Bureau in Uganda

Lenders in Uganda have commenced using the credit bureau information to assist in making better, more informed lending decisions. Compuscan has been collecting, recording and linking loan records together since 2007 in Uganda and has been busy compiling the records for easy interpretation at the time of lending. In certain cases banks have been able to increase their loan offers to new and potential customers based on the information held at Compuscan, without going through long and drawn out processes, or in other cases, benefitting the banks, high risk applicants have been able to be turned down much faster and credit offerings can be made to better risk customers. It is anticipated that almost a quarter of a million loan decisions will have been made using credit information from Compuscan’s data before the end of 2010, representing a value of more than 31 trillion Ugandan Shillings.

The Road Ahead

Looking forward, Uganda is set to take advantage of the improvement in its ranking from the World Bank Doing Business report. Opportunities exist to expand the data being collected and allow more users access to the data, but in a controlled way. The correct infrastructure is now in place for the banks and other lenders to confidently start taking on more risks and explore new markets. With a repository of good quality information being developed at the credit bureau, borrowers are likely to see more aggressive loan offers and more attractive interest rates . With more loan activity, and the correct environment where getting access to credit is becoming easier, the economic outlook for growth in Uganda is very positive.

According to Compuscan Uganda’s Managing Director – Michael Malan

“Compuscan are very pleased in having played a major role in assisting with the sizeable jump in the Getting Credit Index that has been attained in Uganda through delivering the credit bureau services in the country. This recognition is testament to the hard work and effort that has been put in by all stakeholders in Uganda to deliver Uganda’s first credit bureau to exacting world class standards. Delivering a credit bureau is not simply about getting the laws right, or the regulations, nor is it just about collecting data. Successful Credit Bureau implementation is a long and hard road that has to be followed by all parties involved. Added to the complexity in Uganda has been the successful introduction of the financial card. Today, across the country many borrowers, especially people accessing funds from rural Uganda, who previously had no formal way of being identified, carry their financial card proudly and are able to let others know that they too are responsible borrowers in Uganda.

Many parties have been travelling down the start up path, and are now starting to see the benefits of the credit bureau. Customers are being accurately identified; borrowers are able to share their history of previous good payments, can be credit vetted properly, and can qualify for better loans; banks are able to make more informed lending decisions therefore reducing their risk; and getting credit is becoming easier with the country being recognized for that.

I personally want to use the opportunity to recognize the efforts of the staff at the central bank, the banks themselves, and most importantly Compuscan’s staff (locally and in South Africa) for the commitment that has and continues to be given to ensure that Uganda can grow from strength to strength. We employ 39 people in Uganda, and have a specialist team of a further 10 technical and administrative people who provide key functional support to our credit bureau operation. Our people are the biggest cause for our success. Well done to you ! Well done to the Participating Institutions in Uganda, Well Done to the Bank of Uganda and Well done to the People of Uganda.”

For more information on the World Bank Doing Business Report : http://www.doingbusiness.org/

About Compuscan CRB

Compuscan CRB Ltd in Uganda is the Ugandan subsidiary company of Compuscan Information Technologies, registered in South Africa.

Compuscan was established in 1994, and since then has been leading the way in providing credit referencing and risk management solutions to the lenders in developing Africa. Compuscan has experienced rapid growth and has evolved from being a localised credit information agency to one spanning the greater Southern African region, as well as servicing other industry sectors. Compuscan currently services more than 4500 lending outlets and has representation in nine African countries. Full credit references bureau services are provided in South Africa, Namibia and Botswana and now services will be provided in Uganda. Compuscan’s progress reflects leading-edge commitment to developing quality services and solutions to meet commercial needs.

Compuscan’s sister company Compuscan Academy provides credit and life skills training to clients as a part of the South African National Qualification Framework in the Banking Sector. In this regard Compuscan Academyis accredited as an authorized Banking Sector Training Authority (BANKSETA) training institution. Compuscan Academyhas trained over 8000 loan officers on basic office administration, personal development skills, credit knowledge, credit and debt rehabilitation compliance, debtor affordability and aspects of minimizing reckless lending.

The combination of the two organizations allows Compuscan to serve financial industries with relevant and reliable credit information that is used to assist in credit referencing, monitoring, collections and recovery, and where applicable to ensure that skills are delivered to the users of such information to improve overall credit management in each and every organization.

Compuscan employs over 150 staff, has more than 4500 client installations, loads in excess of 30 million unique loan or credit agreements to its various databases each month and makes this information available as part of a credit profile report on a borrower’s credit worthiness (or history of lending activity) at the time of granting a new loan. Compuscan is a tier one member of the Credit Bureau Association and the Credit Providers Association in SA. Only three credit bureaus of 13 licensed bureaus in South Africa at present have achieved this elite position of maintaining both these positions across both Associations. The status allows Compuscan to receive, host and make available the largest shared files of credit agreements in South Africa (exceeding 30 million records, updated monthly).

Compuscan in Uganda have been licensed by Bank of Uganda to exclusively operate credit bureau and customer identification services for borrowers in the banking sector for a minimum period of three years. In Uganda Compuscan employs a staff of 26 people and have offices in Nakasero, Lumumba Avenue. The users of the credit bureau and financial card services are supported financially by World Bank and the German Technical Co-operation in Uganda with funding to defray initial start up costs in the project.

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