Credit information for better access to finance in East Africa

East Africa now has better banking and financial services for ordinary people but not everyone still has automatic access to them. An important way of improving availability is to make credit information more transparent and easier to obtain. Unless the bank knows who pays back, even a good client may not get the loan or may have to pay too much.

CreditInfo of Iceland specialises in establishing credit databases and bureaus in developing countries. It was the first such company to obtain a permit to open a bureau in Tanzania, and in 2015 it began operating in Kenya, too. Finnfund has provided a loan for investments to set up CreditInfo’s credit information operations in Tanzania and Kenya.

One challenge faced by the financial sector in Tanzania has been the difficulty of establishing the identity of individual clients. The country does not have social security IDs or any other simple method of reliable identification. Many people are still unfamiliar with banking and there is sometimes a great temptation to seek loans from several banks at the same time. CreditInfo has supplied the Tanzanian central bank with a system for compiling an effective credit database from information, supplied by financial institutions and companies, about loans and repayment performances.

In addition to credit performance reports, CreditInfo’s bureaus can supply financial institutions and companies with analytical tools and processes for checking credit information and forecasting creditworthiness. These are a way of increasing the quality and efficiency of lending, improving risk management, reducing opportunities for abuse, and shrinking the margins that customers pay. Responsible customers who generate an impeccable credit history can then seek competing offers of finance. Employers have also begun to ask job applicants for credit information records in order to assess their dependability.

CreditInfo Tanzania and Kenya are active in arranging training events for customers and other stakeholders on the uses and advantages of credit information.