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MEMORANDUM TO THE SENATE OF THE FEDERAL
REPUBLIC OF NIGERIA IN RESPECT OF THE ENACTMENT OF AN ACT ON PUBLIC
RECORDS AND INFORMATION DISSEMINATION
Submitted by:
International Credit Information Bureau (ICIB)
Nigeria Limited
5A Ganges Street Maitama Abuja Tel:
09-4138192/3
Fax: 09-4136877
1.0 INTRODUCTION
1.1 The senate of the Federal Republic of Nigeria, in
furtherance of it's legislative mandate is seeking to make a legislation
for the Dissemination and Sharing of public records and Information for
public interest. By notice dated Monday, April 18th 2005 and advertised in
The Guardian, the Senate Committee on Information invited memoranda from
the public in respect of the Freedom of Information Bill before it.
1.2 This Memo is a response to the invitation and is
submitted by the International Credit Information Bureau (ICIB), a private
limited liability company that is working on establishing an independent
private credit bureau of international standard in Nigeria.
1.3 The presentation will concentrate on the
importance of the proposed legislation on the financial and economic
development, particularly the role of the credit bureau in economic
development.
2.0 THE ROLE OF INFORMATION IN ECONOMIC
DEVELOPMENT
2.1 Information plays a very vital role in the
economic development of nations. Decisions are generally based on
information available to the decision maker. Where information is
unavailable therefore, the decision making process would be greatly
impaired.
2.2 Nowhere is this more felt than in the financial
services sector. Financial services providers are intermediaries; they
intermediate and ensure that surplus financial resources are mobilised and
deployed to areas/sectors with deficit financial resources for the purpose
of wealth creation and development.
This creates asymmetry of information between the owners of
the surplus resources and users of such resources which the financial
service providers i.e. banks, leasing companies, insurance companies etc.
seek to bridge.
The availability of information on financial resource and
other users reduces transaction costs thereby the cost of funds.
3.0 INFORMATION AND CREDIT
3.1 Credit has long been identified as the lifeblood
of commerce, aforetiori, economic development. Credit being an exchange of
a present financial commitment in consideration of a commitment to repay
in the future creates the need for information of the party making the
future financial commitment. Such information would enable the party
making the present financial commitment (creditor) assess and
approximately price the risk to be borne in extending credit to the
debtor.
3.2 Lack of access to credit information is
consistently rated as one of the greatest barriers to operational
efficiency and growth.
It used to be thought that paucity of investible funds was
the major impediment to credit delivery and therefore industrialization
and enterprise development in the country. Recent experiences have however
shown that the absence of requisite information that will facilitate the
credit decision is perhaps the major limitation. The World Bank in its
2000 country mapping of Nigeria's SME sector recommended amongst other
measures, the building up of company registration and other information
(including credit information) in order to increase sector participation,
access to loans, etc.
4.0 CREDIT, CREDIT BUREAU AND ECONOMIC DEVELOPMENT
4.1 A private credit registry/bureau is a center that
gathers, maintains and issues credit history reports. Lending
institutions, as members of the bureau, submit factual information on
customers' credit histories in meeting financial obligations. A credit
bureau assembles the information on a one-file, one person basis in its
database, so that members can obtain credit reports on credit applicants
in a timely manner.
4.2 Lending institutions, as members of the bureau,
are able to enter the bureau's electronic database via a safeguard method,
which is available only to authorized users through the use of a password
and identification code.
4.3 A credit bureau does not approve or reject credit
applications. It only reports the information as is. It may also collect
public records from bankruptcy courts or other sources as allowed by law.
4.4 Other types of information centers, such as
central credit registries, are generally set up by central banks to
collect information on large corporate loans. Registries offer only
limited services to financial institutions under the supervision of the
central bank, while a credit bureau tends to collect and maintain consumer
credit information and offer services to all types of qualified lending
institutions. A credit bureau may also sell individual reports to
consumers who want updates on their own credit status.
4.5 Most countries with developed financial systems
have credit bureaus. In the United States, apart from the three national
credit bureaus, there are also 400 other much smaller city-level bureaus.
There are at least two national-level credit bureaus in the UK, Australia,
Japan and South Africa.
4.6 Access to credit may be expanded significantly by
the existence of a credit bureau in the country. The information sharing
role of the credit bureau helps creditors to assess risk and allocate
credit more efficiently, which means that borrowers don't need to rely on
personal relations when trying to obtain credit. Borrowing by high-risk
borrowers is controlled and the market is opened for new low-risk
borrowers.
4.7 Lenders, consumers, businesses, government and
central banks all benefit from credit bureaux. This is why organizations
that provide assistance and advice with the aim of developing financial
and economic infrastructures - such as the World Bank and the Asian
Development Bank - promote and facilitate the development of efficient and
capable credit bureau services around the world.
4.8 The advantages of Credit Bureau cannot be
overemphasized because it helps to:
i. Promote exchange of credit information in the financial system
ii. Improve private credit reporting services
iii. Overcome legal problems in the sharing of
information
iv. Help to strengthen supervision of regulated
financial institutions
v. Help promote the development of small scale
enterprise
vi. Assist in the promotion of good credit culture
vii. Establish credible information symmetries
between borrower and lender
viii. Increase credit volume by allowing more
individuals have access to credit
ix. Create "Reputational Collateral"
x. Enhance the investors confidence in the Nigerian market
xi. Enhance the discipline of micro-financing
xii. Reduces credit risk profile
xiii. Assist economic growth by stimulating the consumer
credit economy
6.0 RECOMMENDATIONS
6.1 From the foregoing, it is clear that the
existence of an Act making public records and information available is in
the public and overall economic development interest of the country.
6.2 We are therefore respectfully recommending:
a. That the proposed Act for making public records
and information readily (not freely) available to the public should
recognise the relevance of Private Credit Registries (PCRs) in the
country.
b. That the proposed Act should stipulate that
relevant specialised private sector organisations like credit bureau could
gather and store information for the purpose of disseminating such
information in a regulated format within the public domain.
c. That financial and lending institutions should
be mandated to make credit information available to the public through
such specialised private sector organisations like credit bureau
Mr. Bankole Opashi
Managing Director
International Credit Information Bureau (ICIB) Nigeria
Limited SA Ganges Street
Maitama Abuja
Tel: 09-4138192/3
Fax: 09-4136877
Email: b.opashi@icibnigeria.com
Website: www.icibnigeria.com
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