The need for Credit Bureaux in Namibia

Submitted to Namibian Parliament on 13 July 2006

Providing affordable financing in Namibia

The need for Credit Bureaux

Introduction
In many developing countries the providers of finance have access to information in databases that help them to asses the creditworthiness of an applicant for credit. With the appropriate credit risk management tools, a lender can reduce the default levels, and provide finance at a cheaper rate to creditworthy clients. The organisations that gather data and operate these services are known as Credit Bureaux, Credit Information Services, Credit Registries, Credit Reporting Agencies or Consumer Credit Reference Agencies.

In Namibia, there is only one company, Transunion ITC, which provides a credit bureaux service for consumer information and they collect primarily negative information (negative – that is information on credit defaults, judgements, etc.). A joint-venture between NamBizDotCom and Creditreform Germany, has been developing a commercial database of over 11,000 companies and has completed a basic consumer database of 250,000 people in January 2007. This credit information service (CRIB) is yet to be made commercially available.

Credit Information Service
The creation of a credit report depends on the availability of information gathered from public records, statutory information, credit applications and credit accounts on the individual consumers and businesses. The bank (or other lender) accesses the service in the form of written reports and uses it to judge the application risk before supplying the credit. The bank can also use the credit report, and its credit risk rating, to determine the amount of the loan as well as the interest and other bank charges.

The usage of a credit report with more than just negative information assists growth in the country by stimulating the consumer credit economy. Borrowers can be assessed for risk in an objective way based on credit payment history so credit can be allocated more efficiently. Many “new” borrowers in Namibia have no credit history, and assessment can be difficult with additional supportive reputational collateral. This reputational collateral can include:
• proof of physical address
• ownership information on property
• family associations
• informal business history
• etc.

The existence of a Credit Bureau with sufficient information should assist growth by stimulating the consumer credit economy. Borrowers can be assessed for risk in an objective way based on their own histories so credit can be allocated more efficiently. Borrowing by high risk borrowers is also now controlled and the market is opened for new low risk borrowers.

Lenders, consumers, businesses, government and central banks all benefit from Credit Bureaux. This is why the World Bank, IFC and USAID organisations are all promoting and facilitating the development of efficient and capable Credit Bureau services around the world.

The effectiveness of a Credit Bureau varies depending upon a number of factors including data availability, data quality, operating ability and legislation. Supportive legislation and a sound technical infrastructure are crucial to effective operation.

The services provided by a Credit Bureau expands from the basic credit report to extended financial information, historical factors, and in many cases, can assist in tracing the debtor in the case of default (debt collection).

In Namibia, the banks are charging high fees and interest rates because of the “difficulties in assessing risk”, and the “unavailability of data”, especially regarding the physical address of clients.

Dilemma collection of data
It must be noted that the collection of data must be controlled to ensure there is no abuse of privacy rights.

The CRIB database has been created with over 11,000 companies and 250,000 consumers. This data includes:
• Full names
• ID Number
• Postal address
• Physical address
• Telephone
• Employer records
(Only +/- 25,000 records are complete)

The creation, cleaning and mining of the data does meet standards of copyright, but such information must be regulated. It must be kept in mind, if an individual has been able to create such a database, what databases are being created and maintained by corporations in and outside of Namibia?

Namibian Situation
The databases available in Namibia range from

• private sector models that include information relating to your account details and histories, Multichoice, MTC, Sanlam, etc.; and
• public sector, such as Home Affairs ID section, Electoral Roll, Municipal accounts, etc.

At present, there is no legislation to:

1. control the information being held on a credit record;
2. avenue for corrections to be made; and
3. enforcing openness in regards the negative reply to credit application.

The legislature also has the opportunity to regulate a range of charges that banks may charge according to the rating of individual consumers and businesses. (e.g. Basel in EU).

Proposal
There is need for the establishment of an economic database that includes both consumer and commercial information. It is proposed that it should be a Private-Public Sector Partnership to protect the privacy rights (data protection) of individuals.

The following will benefit from the establishment of the economic database:

• Small- and medium-sized enterprises
• Business (trading)
• Financial sector (credit providers)
• Government
• Regional and International trade

Credit Reporting Agency for Namibia

*First posted on 23 June 2006*

SUBMISSION ON BANKING REGULATIONS VIS-À-VIS CREDIT PROVISION

The following is the submission made to the Parliamentary Standing Committee on Economics, Natural Resources and Public Administration. They held public hearings on bank charges and regulations on 14 July 2006 in Windhoek.

The banking system in Namibia is presently facing difficulties in their abilities to provide financing for individuals and business, especially small and medium enterprises (SME's). This problem is further influenced by the present level of non-performing debt being experienced in all sectors that provide credit. This poor performance on loans has led to many institutions having to recoup their losses, and provide themselves with profit, through high interests and "innovative" banking charges.

It is my opinion that this can be addressed through the increased usage of Information and Communication Technologies. As an example, I attach a paper on the need for credit bureau, and the establishment of an economic database to address this need. (if you wish a copy of the paper, please email me at miltonlouw@gmail.com)

Through the sharing of information between public and private sectors (with the appropriate legislation to prevent abuse), a reliable source of information can be provided which will necessitate the banking institutions to become more competitive to attract clientele. This clientele in turn will be able to negotiate for better rates, and lower charges, if they are aware of their own credit worthiness.

I remain at the convenience of the Committee to provide any further information they might require to encourage the necessary changes in legislation, as well as provide authority to the necessary public institutions, to implement a system to encourage the responsible growth of the credit sector.

Lastly, I must add that I believe such a credit agency, whether public or private, will only facilitate the provision of credit, and not provide moral influence on us as a society to ensure we keep our side of the bargain and keep up our financial obligations.

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Thought for the week:
"I sincerely believe that banking establishments are more dangerous than standing armies, and that the principles of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale" - Thomas Jefferson (American 3rd President)

Culling of Wildebeest applies to beer

This is not only philosophical but is obviously pure science.

A herd of wildebeest can move only as fast as the slowest wildebeest, and when the herd is hunted, it is the slowest and weakest ones at the back that are killed first.

This natural selection is good for the herd as a whole, because the general speed and health of the whole group keeps improving by the regular culling of the weakest members.

In much the same way the human brain can only operate as fast as the slowest brain cells. Excessive intake of alcohol, we all know, kills brain cells, but naturally it attacks the slowest and weakest brain cells first.

In this way regular consumption of beer eliminates the weaker brain cells, making the brain a faster and more efficient machine. So that's why you always feel smarter after a few beers.

Independence 2009 - reasons for registers

Hi, Milton here. Still at the farm, fortunate to have one of my daughters, Ziana, visit for the weekend.

Thought for the week:
“If you're respectful by habit,
constantly honoring the worthy,
four things increase:
long life, beauty,
happiness, strength.”-Buddha Quote


Enjoy Namibia's Independence Day!

Kind regards
Milton
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Someone asked, why a website with directories of people and business?

The idea of creating an economic country database started in 1994 while working with the United Nations Industrial Development Organisation in Paris, France. Since then I have collected over 11,000 businesses details and 250,000 people. Once the data is collected and cleaned, there are many areas for possible commercial use. However, it has till thus far only been used for research purposes when conducting surveys of the Small and Medium Enterprises for example.

The main aim is still to create a Central Register for Namibia that will include amongst others:
* Register of Residents;
* Register of Business;
* Register of Professions;
* Register of Property Ownership;
* Register of Licences for Natural Resources and Utilisation;
* Register of Trademarks, Patents and Copyright;
* Register of External Trade; and
* Register of other legal entities.

During the past ten years, I have managed to create registers for persons, business and external trade. This has assisted greatly in providing income opportunities for me in various areas in Research.

I would however like to make this information available to more people to see what opportunities might arise.

Lastly, I am preparing a database with much deeper individual information (not yet sure about privacy issues) to allow me to look at a credit assistance scheme that looks at "reputational collateral" rather than history of financial mistakes.

Namibian Family Tree

Hi, Milton here from the farm Okomitundu. I have visited the top of the Kudu Mountain, some 400 metres above the farmhouse (1,670m above sea-level). I was being interviewed for the television programme Green Horizons that should be broadcast on NBC TV on 26 March.

(Some people have asked for a picture of what the farm looks like, so have a look at www.okomitundu.com.)


This week I have finished loading 250,000 Namibians information listed by surname on to the Internet. This includes their name and surname, as well as their date of birth. See my article below and check if your details are online. You might be surprised how many of your relatives are on as well ;-).

Thought for the week:
"Call it a clan, call it a network, call it a tribe, call it a family. Whatever you call it, whoever you are, you need one." ~Jane Howard

Kind regards
Milton
Email: miltonlouw@gmail.com
website: www.nambiz.co.cc
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What is private?

How much of your data is on a computer? How much do companies, employers, the government, even enemies know about your life? Even more worrying, how much of this information is publicly available?

Since 1999, I have been proposing a central register for Namibia (http://milton-louw.blogspot.com/2009/03/central-register-for-namibia.html). This week I listed all people I have been able to collect information on, in a family tree type website. It is available at www.nambiz.co.cc. You enter the yellow pages section and will then have an alphabetical list. Choose the letter your surname starts with and a list of all surnames starting with that letter will appear. Choose your surname, and a listing of everyone with the same surname will appear. You will find their name as well as their date of birth (if it is in the system).

In my case, I checked my cousin, Merle Oosthuizen and found her birthday easily......

My hope is that after looking at the site you will consider the amount of information of yours that is already being stored someplace. I hope this will get your support for a data protection and privacy act being made law as soon as possible.

Remember, I am only one person and have been able to collect all this, what about those businesses who have a lot more data on you?

Email me with your comments: miltonlouw@gmail.com
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