South African Credit Bureau ups it game
South African businesses and individual credit-seekers stand to benefit from a recent announcement by the National Credit Regulator... Cape Town-based credit bureau, Compuscan, has recently been selected by the National Credit Regulator (NCR) as one of only three primary data hosts for the National Loans Register (the NLR).
According to analysts, the more data types or data sets hosted by credit bureaus, the greater the economic benefit for businesses and individuals. The advent of the National Credit Act mandated comprehensive affordability studies of all credit-seekers, meaning accurate updated data is needed to ensure credit is extended to all users fairly and that lenders' risks are minimised.
A vital source of information
The NLR is a vital source of both positive and negative credit information since its inception in 2000. The NLR maintains details of all applications for micro loans. It also contains account and repayment information of loans granted by micro lenders registered with the National Credit Regulator as well as identification and contact information. The NLR currently holds records of approximately 32 million registered accounts. It hosts data arising from an increasing number of micro-loan accounts, at the rate of approximately 5 million per month. Repayment details of millions of micro loan accounts are uploaded on a daily basis.
The emergence of a formal and regulated micro lending industry has benefited hundreds of thousands of South Africans who previously enjoyed only limited access to loan finance. This assists development both at an individual household level and is essential to stimulate small business development.
This, against a continuing backdrop of declining credit records among consumers nationally, makes the need for comprehensive credit checks an urgent necessity, especially in the micro lending market.
Growth in credit transactions
Growth in all consumer credit transactions since the final quarter of 2009, especially short term, is reflected in the NCR-sponsored March 2010 Consumer Credit Market Report. The quarter-on-quarter growth in the short-term sector was the highest at 15.3%, reflecting the role of micro lending. At the same time, Econometrix reports that credit infringements leading to adverse listings and impaired records has increased during the period under review.
According to Compuscan's CEO, Remo Lenisa, his company's newfound status as a primary supplier of NLR data places it on par with its two major competitors and directly benefits credit provision sectors, particularly the micro lenders. "We are extremely pleased at this achievement. This is something we have been aiming for over a number of years. Ironically, we have been the largest supplier of NLR data in the industry for at least 10 years, but have only enjoyed second tier provider status to our clients" he says. "A big benefit to our clients and to the market generally is that we can now provide more complete and comprehensive data sets - a one-stop shop for clients. Carrying out the data processing and analytics in-house, means that Compuscan data is also more up to date than other offerings in the market. This, with scoring of the updated data, means improved scorecards and hence for clients more powerful credit-granting decisions."
Currently, full credit information that includes the NLR is available to South African lenders from three bureaus only. The award of primary NLR data provider status to Compuscan signals more competition in the upper end of the market and hence more direct benefit to the supplier of credit to the SA market.
Consumers in good standing still declining
According to the NCR's Consumer Credit Market Report, 1st quarter 2010, (see Credit Bureau Monitor www.ncr.org.za), the percentage of consumers in good standing continues to decline. The percentage of consumers with impaired records increased to 46.0% from 45.3% in the previous quarter - comprising 17.2% of consumers in 3-plus months in arrears, 15.0% of consumers with adverse listings, and 13.7% of consumers with judgments and administration orders. This is an indication that debt stress levels are still high.
Econometrix highlights, "Growth in consumers with impaired records remained concerning at 12.2% y/y in the first quarter of 2010, which is marginally higher than 12.1% y/y in the previous or fourth quarter of 2009, with judgments and adverse listings absorbing much of the rise. The above suggests that household balance sheets remain under strain despite the economy's recovery from the recession."
The current research results highlights the critical need for all credit providers to carry out a comprehensive credit check on all applicants. This includes looking at judgments, admin orders, collections, defaults / adverse information and debt restructuring information. The more data on a credit report, the better the view on an applicant.
Compuscan advises clients who are currently only making use of limited data sets to make use of the extended data options available. For example, the company collects public domain information (collections, judgements, adverse accounts, administration orders, debt restructuring) from over 500 courts throughout South Africa, fraud information from the South African Fraud Prevention Services (SAFPS) and property information from the Deeds office. As a registered member of the Credit Providers Association, Compuscan also provides account and repayment information of all the banks and retailers in South Africa. Subsequently, all these different data sets ensures that credit providers have a comprehensive picture of who they are dealing with when evaluating the creditworthiness of applicants.
According to Lenisa, comprehensive data sets mean greater accuracy in decision intelligence. "Clients will have access to high-integrity data, including fraud, contact and other business information that can be used strategically to manage risk across all market sectors. All this comes more cost effectively, from a single source."
Compuscan was established in 1994, and has evolved into the first truly home-grown African Credit Bureau. It services a base of more than 3500 credit providers nationwide. It has committed itself to being a total credit management solutions provider for developing markets. Credit management solutions and risk information technologies on offer assist clients in turning strategy into action. Business performance is hence elevated by enriching the capabilities of users to automate more, improve the quality of your decisions and connectivity across the business.
As a full service credit reference bureau the company collects, validates, loads, verifies, houses and distributes credit information. It aims to offer a complete range of value adding products and services to facilitate accurate business decisions, thereby minimising risk and optimising profitability.
Data is loaded and accessed via state-of-the-art internet-based software via batch files, or is integrated into in-house systems of clients such as micro-lenders or banks.
Compuscan works closely with clients to refine systems and processes in order to develop purpose driven credit management solutions and decision-making systems. Partnering happens with organisations and businesses around the world to develop and enhance its systems to the benefit of clients.
The company has operations in Namibia, Botswana and Uganda and is represented elsewhere on the continent. For more information go to www.compuscan.co.za.