Bank of Uganda headquarters in Kampala. A change in the law by the Bank of Uganda (BoU) ending a three-year exclusive agreement with a credit reference bureau has opened up an opportunity for local firms that are offering the service to open shop in the neighbouring country. Photo/FILE
What you need to know:
Uganda’s banking sector regulator has said that it would end the agreement with Compuscan this month. The company provides credit reference services to the country’s 23 licensed banks.
Metropol East Africa and CRB Africa, two of Kenya’s financial service consulting firms, have expressed their interest in the offer.
East African banking sector regulators are pushing to entrench use of credit referencing as a tool for evaluating creditworthiness of borrowers, with an aim of reducing cost of loans for customers who have strong repayment records.
In Kenya, credit referencing started about two years ago, and has seen the blacklisting of more than 200,000 loan defaulters while banks have made millions of enquiries to them when issuing loans. Compuscan had been allowed to operate in Uganda exclusively since 2008.
Over 40,000 enquiries are made a month on new credit applicants. Private sector credit grew to USh 7.46 billion (about Sh257.3 million) as at June from USh 3.97 billion (Sh137.1 million) as at December 2009.
CRB Africa and Metropol East Africa said the move to liberalise Uganda market would make it easier for borrowers, particularly Kenya businesses doing business in that country.
According to the Economic Survey of 2011, the value of imports to Kenya from Uganda has gone up by 72 per cent in the past five years to Sh10.3 billion from Sh5.9 billion while the value of exports to Uganda has more than doubled to Sh75.9 billion from Sh33.5 billion, indicating increased trade.
A change in the law by the Bank of Uganda (BoU) ending a three-year exclusive agreement with a credit reference bureau has opened up an opportunity for local firms that are offering the service to open shop in the neighbouring country.
Uganda’s banking sector regulator has said that it would end the agreement with Compuscan this month. The company provides credit reference services to the country’s 23 licensed banks.
The BoU also advertised calling for companies interested in providing credit reference services to apply for licences.
Metropol East Africa and CRB Africa, two of Kenya’s financial service consulting firms, have expressed their interest in the offer.
“We have an interest in the East African region,” said CRB Africa chief executive officer Wachira Ndege when asked whether his firm would be applying for a licence.
Metropol East Africa chief executive Sam Omukoko welcomed the move by BoU, adding that his company already has clients in Uganda, Tanzania and Rwanda who they provide non-credit reference related services like rating services.
“We have a regional strategy and any opportunities coming up will be welcome to us. This will just be an addition for us,” said Mr Omukoko.
East African banking sector regulators are pushing to entrench use of credit referencing as a tool for evaluating creditworthiness of borrowers, with an aim of reducing cost of loans for customers who have strong repayment records.
In Kenya, credit referencing started about two years ago, and has seen the blacklisting of more than 200,000 loan defaulters while banks have made millions of enquiries to them when issuing loans. Compuscan had been allowed to operate in Uganda exclusively since 2008.
More than 750,000 customers have already been registered in its database, according to the BoU records.
Over 40,000 enquiries are made a month on new credit applicants. Private sector credit grew to USh 7.46 billion (about Sh257.3 million) as at June from USh 3.97 billion (Sh137.1 million) as at December 2009.
“Interested parties may submit their applications for the provision of credit reference bureau services for financial institutions and micro-finance deposit taking institutions to the Bank of Uganda,” said the banking regulator in a statement adding that the credit reference bureau market would be open from next month.
CRB Africa and Metropol East Africa said the move to liberalise Uganda market would make it easier for borrowers, particularly Kenya businesses doing business in that country.
“What they are taking about is the CRB (agreement) which was exclusive for the banks but now they are moving to how the Kenyan market is,” said Mr Ndege, adding that his firm already has a presence in the country.
He said that financial markets were getting more integrated as banks open outlets to serve businesses in the bloc, adding that cross-border trade had increased.
According to the Economic Survey of 2011, the value of imports to Kenya from Uganda has gone up by 72 per cent in the past five years to Sh10.3 billion from Sh5.9 billion while the value of exports to Uganda has more than doubled to Sh75.9 billion from Sh33.5 billion, indicating increased trade.
“There are a number of banks operating in the region and any service provider will be looking to operate in the bloc. It means that it will be possible for a good borrower from Kenya to carry their credit history and get credit in Uganda,” said Mr Ndege.
Besides Kenya and Uganda, CRB Africa also operates in Tanzania, Mozambique, Botswana, Zambia, Ghana and Egypt.
The credit reference bureaus are eyeing Uganda at a time when the Central Bank of Kenya has put forward proposals to amend the law to require the sharing of positive information for borrowers to obtain cheaper loans.
“It will be easier for a consumer doing business in the region to access their information in Kenya and use it,” said Mr Omukoko.
