As the time winds down to when a preferred operator is announced to establish The Bahamas’ first credit bureau, Chairman of the Clearing Banks Association Gowon Bowe said much of the focus of financial institutions is on ensuring they are prepared for the shift.
“So, from the Clearing Banks Association’s perspective, it is really more a case of saying that as mandatory contributors of information, how are we readying ourselves in order to provide information to the credit bureau,” Bowe said in a recent interview with Guardian Business.
“As it relates to moving forward with a credit bureau, as that selection process winds down and there is a preferred operator that is identified, there is then going to be a transition period that will be the creation of systems for the integration of banks, in terms of their reporting information, so the format, frequency, accuracy and ultimately the validity of the information.”
Bowe said from there, the education process and campaign for the various stakeholders, including consumers and borrowers, begins.
“That’s also going to be the case for the other institutions that may be brought into the system, like the utility companies, the purchase hire entities, those that lend on credit to buy assets like cars or furniture, and payday lenders,” he said.
“So it really is about bringing clarity over the credit profiles of individuals that are seeking credit.”
The Central Bank of The Bahamas (CBOB) is expected to announce the identity of the operator next month.
Parliament passed the Credit Reporting Bill, 2018 in February, paving the way for the Central Bank to issue licenses for credit bureaus.
Bowe said the “mechanics” of establishing the bureau will be as fast or as slow as necessary, to ensure that the information gathered on credit holders is accurate.
“It really is a mindset of saying how do we unleash the buildup of liquidity in the system, where there is heavy precaution over who is granted credit and who is not,” he said.
“With that process the banks have been long involved in it from the early days of the crafting of the legislation, so this goes back several years. It was only a reigniting of the process when the legislation was passed in April, but that was one that was on the agenda for an extended period of time.”
In April, CBOB released a request for proposals (RFP) for the establishment and operation of a private credit bureau, and said it hoped to have two possible vendors shortlisted by the end of June.
The CBOB had given a deadline of the end of 2018 to have the bureau established.
A credit bureau is a system that enables lenders to attain better information about borrowers, according to Bowe.
“In terms of the actual benefit of the credit bureau, it is really on the consumers and borrowers, because it will now shine a light on those that are prime borrowers and those that are subprime,” he said.
“Currently in The Bahamas everyone suffers in terms of the innocent suffering for the guilty, meaning that in the absence of being able to distinguish between a prime and subprime, the general rule has been to treat everyone equal, and that means taking cautious rate and lending practices to ensure that, even though you may have a prime and ideal borrower, you don’t have sufficient information to objectively make that conclusion.”