Credit Bureaus Push Market Development in Ukraine
With the Ukrainian economy booming, income levels rising and the banking sector becoming more advanced, more and more Ukrainians are taking bank loans to buy a house or start a business. As the demand for credit rises, banks need to expand their capacity to extend low-risk loans based on good information. Even if a potential borrower has every intention of paying back a loan, it doesn't help a bank to decide whether he has the ability or desire to repay a loan. Only by having access to a person’s credit history – its size, pattern and timeliness of monthly payments, the type of credit previously taken – can a bank define person’s creditworthiness. Worldwide, the individual and organizational credit histories are disseminated by credit bureaus, private entities that gather and provide credit histories. With a perfect credit history, a borrower can usually obtain credit at the lowest possible rate.
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Yevhen Nevmerzhytsky, Director of CreditInfo-Ukraine and Antonina Palamarchuk, Director General of the First National Bureau of Credit Histories strike the deal
Photo Credit: CreditInfo |
USAID helped with the development of a crucial law that laid the ground work for the establishment of credit bureaus in Ukraine, entitled the Law “On Establishment and Circulation of Credit Histories.” Next, the USAID-funded Access to Credit Initiative (ATCI) Project developed business plan that unambiguously outlined the steps needed to establish and further develop the industry. The business plan stressed the importance of resolving credit bureau shareholder issues, minimizing data fragmentation, and the importance of engaging a credible international credit bureau operator.
In the summer of 2006, after months of negotiations and continued assistance from ATCI, the First National Bureau of Credit Histories announced that the Creditinfo Group Hf. (Iceland) had won a tender to become its international operator. Having an international operator is a breakthrough in assuring the success of the credit bureaus. Creditinfo (already a shareholder of IBCH) will also participate as an FNBCH shareholder and a vendor of credit bureau systems and related services, thereby transferring its know-how and experience in implementing similar credit bureau projects in many countries.
ATCI also provided assistance to the Ministry of Justice of Ukraine, the government regulator of credit bureau operations, in drafting a key regulation on licensing requirements for credit bureaus, which was approved in December 2006. In January 2007, First National Bureau of Credit Histories and the International Bureau of Credit Histories, two established Ukrainian credit bureaus that follow international standards of practice, received licenses and currently are developing data gathering to data processing expertise that should soon result in the commercial sale of credit reports.
ATCI is continuing to support the Ministry of Justice in drafting two more regulations (specifically, on a unified registry, and on inspections of credit bureaus), as well as other instructions and recommendations for the market. Furthermore, ATCI intends to hold public awareness campaign targeting both market participants and the general public once credit reports are commercially available.
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