MFIs credit bureau on course

Work on a credit referencing system for the microfinance sector is scheduled to be completed by middle of next year, the Ghana Association of Microfinance Companies (GAMC) has said.

According to the umbrella-body of the microfinance companies, it is currently working with the Bank of Ghana and other licenced credit bureaus to develop a system for companies operating within the microfinance sector.


A credit bureau is a repository of credit information, a neutral entity that collates consumer credit information by soliciting creditors such as banks and other lending institutions to contribute and share their credit information on consumers.


Chairperson of the Association Collins Amponsah-Mensah told the B&FT plans by the association to get its own credit referencing system will enhance the operations of companies in the sector.


“We have come very far with the credit referencing system for the microfinance sector…We have had discussions with three registered credit bureau and the regulator, and we came to the consensus that it would be good for the MFI industry to have its own credit referencing system to be managed at Ghana Microfinance Institution Network (GHAMFIN) level.


“Although GAMC has its own internal referencing system, we are now bringing on board the other associations [e.g. Money Lenders Association etc.] by December, and then we will have to sit down and work together with licenced credit bureaus and the regulator and develop a middle link so the others can plug into our servers and take the data they want and vice versa.

Hopefully, by the middle of next year we will have something working for all of us,” GAMC’s Board Chairperson, Collins Amponsah-Mensah added.


Signing onto the existing credit reference bureaus is not feasible due to the sheer number of microfinance companies as well their huge customer base.


“If all microfinance companies are to sign onto the existing credit reference bureaus, there’s no way their systems can function properly. For instance, while a bank can process GH¢1million for a single client, that same amount could be processed for as many as 300-400 customers in the microfinance sector.


So while they key in that data for a single client, a microfinance company will be doing it for 300-400 clients. Hence this has possibility of clocking the database of the existing credit bureaus,” he added.


Currently about 500 MFIs have been licenced to operate, out of which 390 are microfinance companies, 50 are money-lending companies, and seven are financial non-governmental organisations.

The establishment of a credit referencing system for the microfinance sector, according to analysts within the sector, will eliminate the incidence where a single customer can dubiously borrow from multiple MFIs.


One microfinance company told the B&FT recently it found out that one of its loan clients is indebted to sixteen other companies and is having difficulties settling his indebtedness, and it believes introduction of the credit referencing system help the operations of stakeholders within the sector.


A fully-functional credit referencing system for the microfinance sector has the potential of lowering the cost of borrowing – which is currently considered very high due to the high risk involved in giving credit to customers.


The country’s Parliament in 2007 passed the Credit Reporting Act, (Act 726) to facilitate the activities of reference bureaus. So far, three licences have been issued by the Bank of Ghana which regulates the sector.