The Tribune

* Bank chief warns past comes back to bite

* Industry will escape 'dangerous waters'

* Reporting start likely later than 2021 Q2

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Up to 30 percent of Bahamian borrowers will struggle to obtain loans due to the imminent arrival of the nation's first-ever credit bureau, a top banker is warning.

Kenrick Brathwaite, the Clearing Banks Association's chairman, told Tribune Business that close to one-third could find their ability to access new credit is curtailed because past failures to disclose existing debts will come back to haunt them.

For the credit bureau, which Central Bank governor John Rolle said will begin to issue its first reports by the start of 2021's second quarter, will be able to provide all commercial banks and other lenders with a complete picture of a potential borrower's history - including whether they already have too much debt, and if they have defaulted on previous loans.

Alerting Bahamians that they will no longer be able to bounce from one bank to the next, hiding histories of missed payments as they go, Mr Brathwaite said the credit bureau would enable the industry to escape "operating in dangerous waters" where it does not possess a complete picture of a loan applicant's creditworthiness.

Suggesting that close to one out of every three Bahamians may be negatively impacted unless they mend their habits, the Clearing Banks Association's (CBA) chair told this newspaper: "I would say that at least 20 percent to 30 percent of borrowers who borrow today do not provide full information to the bank.

"I would say 20-30 percent will be impacted by the credit bureau, and that's a lot. The credit bureau will introduce things that the banks never had the ability to verify. We've never had the ability to verify whether you pay your rent, your utility bills on time. Whether you are telling us the truth with regard to what you already owe.

"All these things will be incorporated into one document. It will generally be good for The Bahamas to introduce the credit bureau. It's a needed thing, and has been on the table for quite a while."

Italian-headquartered CRIF SpA, which has a presence in providing such services in 30 countries across the Caribbean, Europe, North America, Africa and Asia, was eventually selected as the preferred bidder to operate the credit bureau in late 2018 and finally completed the Central Bank’s licensing process in late 2019.

It is now gathering information from lending institutions mandated to supply it with all details on existing borrowers, particularly their credit profiles and histories, by the Credit Reporting Act so that it can ultimately provide all lending institutions with information that will enable them to properly assess a loan applicant's creditworthiness.

Among those required to supply information will be the commercial banks, insurance companies, credit unions, financial and corporate services providers, Bahamas Mortgage Corporation and Bahamas Development Bank. Others likely to be added in the future are the utilities, auto dealers and furniture stores that extend credit to customers, and even the government’s revenue agencies.

Mr Rolle last week said the credit bureau would provide a significant boost by establishing transparency surrounding the creditworthiness of all borrowers. "The bureau’s credit information reports will help to reduce uncertainties around the quality of potential borrowers, improving the medium and long-term access to both business and personal credit," he said.

"The bureau, which was licensed at the end of 2019, is now setting up operations, and should begin to produce live personal credit reports data by start of the second quarter of 2021. Commercial credit reports will start to be generated in a subsequent phase of operations."

However, Gowon Bowe, Fidelity Bank (Bahamas) chief executive, who sits on the committee overseeing the credit bureau's implementation, yesterday described the 2021 second quarter timeline given by Mr Rolle for the launch of borrower credit reports as "optimistic".

He added that this was when "the sample report and information gathering" would begin, explaining: "I think what is intended is that the form and format of the report is expected in the second quarter, and then the information that is going to be gathered by the primary reporters is going to start coming in. That timeline is not being used as the final credit report for any individual."

Mr Brathwaite, while acknowledging that it would take both consumers and commercial banks time to adjust to the new environment created by the credit bureau, said it should benefit those with good repayment histories while also enabling lenders to improve loan portfolio quality and minimise risks associated with delinquent or non-performing loans.

"It will be a good boost, especially for unsecured credit," he told Tribune Business. "We're operating in dangerous waters because we don't know the true extent anybody has in terms of their existing debt service levels.

"It'll be an adjustment because Bahamians are accustomed to walking into a bank and telling them what they want to tell them, and leaving out things like utility payments. Do you have arrears on your utility bill? Do you pay your rent on time:? All these things will be factored into the credit score."

But, while banks will "have a good handle" on borrowers' creditworthiness and "be in better shape", Mr Brathwaite added that one effect of the credit bureau will likely be that "the pool of qualifying borrowers will be smaller".

"That's a two-edged sword," he explained. "Most of the banks will take the choice of having good quality loans as opposed to having a lot of loans with high delinquencies. If your modus operandi is growth by quantity you will have a bigger challenge. If your strategic plan is to build by quality, you will love it. We do have banks that build profit by volume and banks that build profits by quality."

Similarly, Mr Brathwaite said Bahamians with good credit scores will benefit from having greater access to lower-priced loans that their counterparts who have regularly defaulted or missed payments.

"People will say having a credit bureau is better for a country as you get better opportunities to access credit, and a better opportunity to assess people coming in for loans," he added. "That is good, and giving people an opportunity to improve their ratings.

"Those persons that have good ratings, the flip side is that more will be available for them. Those persons with good credit ratings are going to love it. Those persons that have challenges throughout the industry that have challenges, they're not going to like it. They're going to find difficulties getting financing."