RBZ Credit Registry in final phase
THE Reserve Bank of Zimbabwe Credit Registry Bureau will go live this week, as part of Government’s initiative to enhance financial infrastructure for the benefit of borrowers and lenders in the financial sector.
Through the Banking Amendment Act No 12/2015 gazetted on 13 May 2016, the RBZ was empowered to set up a credit registry and require financial institutions and public utility companies to submit credit information.
The Act also empowers the central bank to license private credit reference bureaus. Regulations have been developed and are under review.
A Czech Republic-based institution, Credit info, was retained to develop, customise and install the credit registry software. Credit info deployed the first test version of the credit registry system on 30 June.
RBZ supervision department deputy director Mr Philip Madamombe said RBZ was in the process of assessing the test version for formality and in accordance with requirements. He said the main objective of the credit registry was to bridge the information asymmetry gap in the financial sector between borrowers and lenders, and alleviate problems of adverse selection.
“Hardware inspections, data and software parameterisation and customisation have since been completed. RBZ is currently assessing the test version for conformity with specifications. We are looking at going live on 31 July. There is a need for information sharing among financial institutions to curb serial borrowers, loan defaulters and non-performing loans,” he said last week.
Mr Madamombe said the regulations on licensing private credit reference bureaus will cover inter alia, key aspects that include licensing framework of private credit reference bureaus, operations of a credit reference bureau like permissible activities, collection of credit information, dissemination of credit information, responsibilities of providers, and rights of individual.
He added that the RBZ was in the process of establishing a collateral registry, a publicly available database of interests in or ownership of assets, allowing borrowers to prove their credit worthiness and potential lenders to assess their ranking priority in potential claims against particular collateral.
“Reserve Bank of Zimbabwe is in the process of establishing a collateral registry. Legislation to govern the establishment and operation of the collateral registry is being developed in collaboration with the Ministry of Finance and Ministry of Justice. Movable collateral under the proposed law will include equipment, inventory, accounts receivable, farm produce, household items, fixtures and bank accounts.
“The collateral registry system is aimed at providing a mechanism for efficient registration of security interests in movable property and realisation of such interests in the event of a default. It is also aimed at creation and perfection of moveable security interests. It is aimed at providing a platform or notifying parties about the existence of a security interest in movable property and establishing the priority of creditors vis-a-vis third parties,” said Mr Madamombe.
Zimbabwe Asset Management Company chief executive officer Mr Cosmas Kanhai, said the credit registry system was going to improve credit management system in the country. He added that it was going to help get rid of non-performing loans (NPL) and bad habit borrowers.
“This system will improve credit risk management of banks and other credit offering financial institutions. It will also improve NPL ratings. On the other side it will also be useful because we should look at the positive aspect of such a system. There are businesses and individuals who pay their loans well on time. So this credit registry will help identify all those issues. People who pay back well will have better preference in terms of financial assistance,” he said.
A credit registry will contribute a lot to the national economic development. Information sharing through a credit bureau is generally associated with higher levels of lending in relation to gross national product, credit system is important in attracting foreign investors, especially those who do credit business, it leads to financial sector stability and development and complement existing systems for monitoring of financial crimes and money laundering.