Central bank moves to simplify borrowing
Dar es Salaam. Tanzanians now need to have clean credit histories to be able to access loans, following a newly launched Credit Reporting Awareness and Financial Literacy Campaign which currently enables
lenders to share accurate borrower’s data between financial institutions and all stakeholders.
The sharing of credit information will contribute towards teaching financial discipline and avoiding imprudent and excessive borrowing.
Credit information sharing makes it easier to manage credit risk and make more informed credit decisions when providing financing.
Bank of Tanzania (BoT) Governor Prof Florens Luoga said this on behalf of the Minister of Finance and Planning Prof Philip Mpango during the launch of the Credit Reporting Awareness and Financial Literacy
Campaign.
The campaign dubbed, “Know your credit History to improve your life” was organized by BoT in collaboration with the International Finance Corporation, a member of the World Bank Group.
“This national public awareness campaign aims to educate consumers and businesses to raise levels of awareness around credit reporting with a view to increasing the use of Tanzania’s credit reporting system,” he
said.
He said, sharing of credit information reduces information irregularities between lenders and borrowers and search costs, thereby enhancing access to finance to a broader spectrum of the population.
He explained that BoT launched the credit reference system in September 2012 following issuance of two pieces of regulations made under the Bank of Tanzania Act 2006 namely the Credit Reference Databank Regulations 2012 and the Credit Reference Bureau Regulations 2012.
Adding, currently there are two licensed credit reference bureaus operating in Tanzania, which include Dun and Bradstreet Credit Bureau Tanzania Limited and Creditinfo Tanzania Limited.
He said the two obtain credit information from the Credit Reference Databank maintained at the Central Bank and alternative data from other entities such as utilities, telephone companies, external debt collection agencies, wholesalers and retailers who offer goods or services on credit, public institutions such as the Business Registration and Licensing Authority, National Identification Authority and Court Registries.
He said that the credit bureaus prepare credit reports and make them available to lenders and other users on request at a certain cost to assist lenders in analyzing and evaluating potential borrowers’
creditworthiness.
The system is expected to contribute to reduction of borrowing costs, non-performing loans and enhance financial stability.
To ensure security of credit information and protection of consumers or borrowers, the legal and regulatory framework around credit reporting provides for specific conditions regarding data collection,
data disclosure and privacy considerations including obtaining consent from borrowers for their information to be shared.
However he noted that there is a set of information that can be shared, permissible purposes for which the information may be used and prohibited information.
“Consumers or borrowers are entitled to a free credit report once a year upon request and have the right to challenge information contained in their credit reports. The benefits of giving borrowers access to their credit reports is to build trust, ensure transparency, accuracy of information.
To ensure compliance with legal and regulatory requirements and enhance credibility of the credit reporting system, BoT supervises the operations of the Credit Reference Databank and Credit Bureaus,” he
said.
He noted that In addition, BoT has noted that lenders mostly banks and financial institutions being users of the credit bureaus services are not resolving customer complaints timely as evidenced by the
increasing number of complaints on incorrect credit information in borrowers’ credit reports.
The Bank has also observed in some incidences that some lenders have used the negative entry in credit reports to deny credit to persons that are creditworthy.
