RBZ can’t run credit registry, says World Bank

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RBZ can’t run credit registry, says World Bank

THE World Bank says a Reserve Bank of Zimbabwe-run central registry will undermine the institution’s position as an overseer as it also has to double up as a service provider.
Speaking at a stakeholders meeting on the establishment of the Credit Reference Bureau yesterday, World Bank Principal Financial Specialist, Luz Maria Salamina said RBZ which has since set up a credit registry department is also unlikely to further sustain and develop the registry.
“A credit registry run by the central bank weakens the position of the regulator that is to oversee compliance with the law, not to provide a service. Further development and sustainability of the registry is also at risk because it does not have the incentives to innovate as a private business does.
“The registry also requires investment in systems and equipment, as well as qualified technical staff. Most efforts and resources will be placed on delivering a service, making it difficult to fulfil the supervision role over the quality of the data and the credit reporting services as well as consumer protection issues; since the registry will be doing a dual job,” she said.
Salamina said implementation of the CRB will also be delayed by government processes, thereby delaying progress while providing little additional value in a system that already has service providers.
She however said the registry will promote compliance from all data providers, if RBZ can be able to also collect data from non-regulated data providers, resulting in data quality and standardization.
She said although Zimbabwe’s Doing Business credit information rating of 3 is higher than the the Sub Saharan Africa average, the coverage reported of 5.8% is still too low. The RBZ hopes to reduce the NPL ratio in the banking sector to 5% from the prevailing 14% once implementation of the CRB has commenced.
RBZ bank supervision director, Norman Mataruke said the CRB will also bring down the average interest rates in the banking sector.
“We want to deal with the high levels of non-performing loans in the banking sector and bring it down to acceptable levels of 5% from the current 14%. The CRB will also deal with the lax credit culture which is currently rampant in the country.
“We want to reduce challenges of credit information asymmetry and potentially bring down average interest rates. The central credit registry will contribute to more robust credit risk management practices which will help promote the safety and soundness of the financial system,” he said.
Mataruke said the Reserve Bank will implement a hybrid credit reference system, with provision for both private credit bureaus and a credit registry which will be fully owned and operated by the Reserve Bank. He said the bank is currently selecting the vendors that will roll out the CRB program.
“The model the Reserve Bank is implementing is not intended to result in the extinction of private CRBs as they will continue to have an important role to play within the economy. Private CRBs accredited by the Reserve Bank would be able access information requested at a nominal fee,” he said.
Deputy RBZ governor, Charity Dhliwayo said in addition to the establishment of a Credit Registry Department, RBZ is also in the process of coordinating data providers as well as the private credit bureaus to work on the development of standard data templates to enable all data providers to submit data in standardised format.
“The Reserve Bank has also reached a stage where is contacting and assessing the suppliers of information systems that are going to be used by the credit registry with a view to acquire the software,” she added.
Dhliwayo said the requisite amendments to the Banking Act have since been approved by Cabinet to provide for adequate legislation to cover operations of the credit registry and appropriate regulations for the licensing and operation of private credit reference bureaus.- FinX