Credit Reporting is coming to the Eastern Caribbean Central Bank Member Countries
We are all too familiar with the woes experienced when attempting to access credit. Whether it is for a mortgage, to expand your business, purchasing a new car or having life altering medical procedures, the lament of consumers about the lengthy or complex processes involved in accessing credit has been heard. We have all felt the brunt, anxiety and misery associated with these processes. On the other hand, financing institutions are burdened by an increasing number of nonperforming loans owing to flawed credit risk management strategies. Consequently, this perpetuates the seemingly endless loop of high loan application rejection rates due to constraints with credit history, unacceptable collateral or cosigners or incompleteness of the loan application.
The good news is that there is a solution being implemented by the Eastern Caribbean Central Bank (ECCB) through the support of the Compete Caribbean Partnership Facility (CCPF) that will make the loan application process much easier and faster for both consumers and lenders. A solution that is thoroughly regulated, secure and accurate – it is the ECCB’s Credit Bureau services- a separate institution that collects information from creditors and available public sources (like utility companies and civil records) on a borrower’s credit history. This information is then collated to create a comprehensive report on the borrower and made available to the lender. Additionally, having a credit bureau service will create an information base that will assist both banks and non-banks to improve credit selection, improve credit risk management and reduce non-performing loans. This is poised to add a powerful information source in support of risk-based bank supervision.
The credit bureau, which is legally registered as Creditinfo ECCU Ltd., is still in the process of implementation. Creditinfo is one of the leading global credit agencies operating credit bureaus in thirty-three nations with three of them being from the Caribbean – Barbados, Jamaica and Guyana. Moreover, Creditinfo has a reputation for being able to successfully run credit agencies in nations with small populations because of its basis in Iceland, which has a population of 341,000. Nonetheless, given its success in the other Caribbean jurisdictions, Creditinfo is consequently knowledgeable with the region’s profile and characteristics as well as any potential difficulties.
Creditinfo ECCU Ltd. will be regulated and governed by the ECCB, as the ECCB is responsible for the implementation of the Credit Reporting Act (2017), under which the credit bureau and credit information sharing is regulated. This instills greater confidence in borrowers and lenders as there is a guarantee of fairness, accuracy, and privacy of information in the files of credit bureaus and in the practice of credit reporting. The Act’s provisions are in line with the principles of confidentiality, accuracy, relevance, and appropriate use of credit information. Moreover, the Credit Reporting Act (2017) aims to enable improved risk management and pricing methods for loans, as well as credit evaluation procedures, across the financial industry. The Act was passed in the Parliaments of Antigua and Barbuda; Saint Vincent and the Grenadines; Grenada; Saint Kitts and Nevis; Montserrat and The Commonwealth of Dominica. However, the law is yet to be passed in Saint Lucia and Anguilla.
The CCPF, through its donors the Inter-American Development Bank, the United Kingdom’s Foreign, Commonwealth & Development Office, the Caribbean Development Bank, and the Government of Canada, has worked closely with the ECCB to augment the regulatory reform related to credit reporting. Through its project “Establishment of Credit Bureau in the Eastern Caribbean Currency Union”, the CCPF has implemented a range of initiatives aimed at strengthening the capacity of the ECCB to serve as an effective regulator. Over forty-two staff members, twenty-five of which are women have been trained, in credit bureau supervision. Further to this, a supervision manual was developed along with a training manual which will serve as orientation to new staff members.
The CCPF is also working with the ECCB to implement a communications strategy to sensitize stakeholders on the Credit Reporting Act (2017) and the launch of the credit reporting services. On July 19th, 2022, a media sensitization session was held which officially launched the communications campaign of the credit bureau services. The sensitization session hosted jointly by the CCPF and the ECCB attracted a number of media outlets, financial institutions and micro, small and medium-sized enterprise (MSMEs) clients.
Governor of the ECCB, Mr. Timothy Antoine corroborated the impending establishment of the credit bureau and reaffirmed the importance of credit to the financial environment of the ECCU member states. “The goal is transformation of the Currency Union, and we cannot transform this currency union without a modern credit ecosystem. Credit is key, it is the lifeblood of every economy and so, to transform our currency union, one of the imperatives is the establishment of a modern credit ecosystem.” He went on to identify the creation of the credit bureau as an instrument for economic recovery in the ECCU. “As we think about the recovery of our region from the pandemic and how we transform the region while building resilience, the necessity for our credit bureau looms large. Every place where a credit bureau has been established, we have seen a rise in credit. Therefore, the introduction of the credit bureau works very well for the ECCU and what we can do to elevate the trajectory of growth and development in our region.”
The IDB Country Representative for Barbados, Ms. Viviana Alva-Hart underscored the importance of the credit bureau’s existence in alleviating the challenges faced in accessing credit by underserved populations. “The reality is that for most women, their credit history is their main asset. Therefore, the lack of basic information sharing between financial institutions, coupled to the dearth of basic credit information on these women, will disproportionately affect female entrepreneurs. It is only through greater access to finance that firm-level innovation can be facilitated which in turn, raises productivity, boosts the competitiveness of the private sector, and spurs economic growth.”
Christopher Louard, Director of the Financial Sector Supervision Department of the ECCB clearly outlined four major safeguards covered within the Credit Reporting Act (2017) – the provision of a licensing regime, a consumer protection framework (permissible purpose consent), the rights of access and correction and the complaints and dispute resolution framework.
Louard concluded by reasserting the importance of the ECCB’s role in the regulation of the credit bureau. “Effective regulation and supervision is a key component and is extremely necessary to ensure the proper functioning of a credit bureau within our system. It will ensure efficient credit information sharing, ensure that consumer data is protected and ensure that there is accurate credit reporting and sharing across the Currency Union.”
So, what’s in it for you? Lenders will be able to increase their lending to personal and MSME clients that have a good repayment record and little access to finance. This means that loan approvals processes will be more efficient, transparent, and fair, without prejudice or discrimination. For the banking sector, this means improved client selection, detailed portfolio performance monitoring and improved identification of high-risk clients or market segments.
Potential borrowers should now take the necessary steps to ensure that they pay their loans and bills on time, apply for credit only if they can meet the repayment terms, keep their credit card balances low while ensuring that full payments are made before the due dates and if necessary, have conversations with their lenders to renegotiate payment terms.
 Non-Performing Loans in the ECCU: Determinants and Macroeconomic Impact- Beaton, Myrvoda & Thompson- IMF, 2016
 The 2014 Productivity, Technology and Innovation (PROTEqIN) survey was coordinated by the Inter-American Development Bank as administrator of the Compete Caribbean program.