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Credit bureau to help spur booming banking sector
Published in Daily News Egypt on 03 - 07 - 2008

CAIRO: Around 93 percent of banks operating in Egypt and two mortgage finance companies have helped Egypt's credit bureau collate personal financial data on their clients, the bureau's managing director said recently.
"Our target information providers include banks, financial institutions such as mortgage finance and insurance companies, as well as telecom operators, Mohamed Refaat said.
These institutions will provide the bureau with corporate and retail credit information as well as financial data needed to compile its database.
I-Score, Egypt's first private credit bureau, reportedly began operations at the end of last May. As the name suggests, i-Score evaluates a person's credit worthiness and maps out potential risk posed by lending money to consumers, which will in turn help mitigate losses due to bad debt, officials explained.
"I-Score cuts time taken to [qualify for a loan], improves lender's productivity, and reduces default rates, Refaat said.
Furthermore, he added, individuals applying for loans can present their credit worthiness report which save them from paying a collateral.
Refaat pointed out that i-Score aims to generate consumer demand for credit as well as boost credit and lending operations in banks and financial institutions across the country.
"Mortgage lending in Egypt is growing, however, it [only] represents roughly one percent of GDP. What prohibits companies from expanding in lending operations is lack of information. This is where we come, and i-Score in building an efficient information process, he added.
Ossama Saleh, chairman of the Mortgage Finance Authority (MFA), reiterated the same comments and added i-Score can spur more growth in the country's mortgage finance market.
"The credit bureau is an important part of the process, and now the pieces are coming together, he said. "The credit bureau will help spread financial commitment, which is currently missing. This sort of commitment will also allow lenders boost size of their loans.
In 2006, the International Finance Corporation (IFC) - the private sector arm of the World Bank - provided advisory assistance to help start-up i-Score. IFC initially helped i-Score conduct a market assessment and develop a business plan to ensure a sustainable revenue model.
"We helped i-score carry out a feasibility study in terms of identifying the size of the market, installing technology, and of sharing data, Thomas Jacobs, operations officers for financial markets at the IFC, told Daily News Egypt. "We later took the initiative forward and helped with its launch.
Moreover, he added, IFC assisted i-Score in selecting an international partner to provide the technological platform that facilitates the gathering, processing, and distribution of credit information to banks and other financial institutions.
Jacobs pointed out that i-Score has a huge potential in Egypt, as several banks are currently eyeing the Arab world's most populous country in a bid to tap its low banking penetration rate.
"Egypt's banking sector is growing. As more banks move into the country, they realize they need information on credit lending, he clarified. "Plus, i-Score facilitates access to credit for those individuals that have positive credit history.
Still in the process of compiling its information database, i-Score has faced some resistance from banks that refused to divulge their clients' credit history. "Some banks are faster than others, Jacobs said. "But i-Score is helping banks understand importance of credit bureau information that will [in turn] enable them manage risk.
i-Score will provide lenders with five-year credit histories for loan applicants with an internationally accredited IT system and top-of-the-line security provisions. Lenders can use the bureau's credit scores to determine who qualifies for a loan, at what interest rate, and at what credit limits.
Consumers with bad credit history are subject to paying higher interest rates or could have their loans revoked so as to reduce rate of defaults and to encourage borrowers or debtors to pay their installments on time.
Refaat added that institutions that refuse to share their clients' credit history with i-Score will not receive data from the bureau.


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