Sa-Dhan FI Conference 2014 – Inclusive Credit Information Bureaus (CIBs)
Mr Sanjay Patel, CEO, Equifax
Mr Sridhar, Sales Director, Experian
Mr Sharad Joshi, CEO, Centre for Community Economics and Development Consultants Society (CECOEDECON)
Ms Shibani Sachdeva, Regional Director, Planet Finance
Moderator: Mr Colin Raymod, IFC
Mr Raymond (IFC) – The question that comes to mind about CIBs is if they are realistic? Two examples from other parts of the world are Australia: CIBs include 99% of the credit active population. In USA: 35-50 mill people are not recorded in the credit reporting space. This is a journey and takes a while. We have recently seen a lot of integration over time. We now have a lot of data from banks and MFIs. There is still a large portion of the population not covered in the credit database. Is the idea of being stored/recorded in a CIB an incentive?
Everyone in audience says yes.
Mr Jaggia (HDFC) – Glad to hear that it is a good thing. The first time you take a loan – that dose of credit is not the ultimate aim and the objective is to repay and gain an even bigger dose of credit. These records will help build trust in the borrower. Equifax is a credit bureau and the rule is for MFIs, etc. to give data to the bureau so that they can build a credit history for the borrower.
Mr Joshi (CECOEDECON) – Sanghamitra is giving SHG loans only. It is giving data to JLG models and has individual level data. We used to capture data for 1 or 2 individuals in the SHG only (SHG leaders mostly). But individual level data must be available so that we can avoid over-indebtedness and multiple sources of lending. Irrespective of our legal form, we must avoid what happened in AP.
Mr Sridhar (Experian) – Why do SHG members have to visit the bank more than 10 times for a single loan? The bank officials cannot finish the work in one visit maybe? But the banks also need to check if the members have multiple loans – this requires repeated visits. Yes Bank and HDFC saved the microfinance sector since the public sector was not lending but they checked the bureaus. 7% have defaulted so the other 93% needs to rely on their credit history so they are not penalized.
Audience Question - What about the amount? The amounts sanctioned are not enough to fund entrepreneurial activity.
Mr Jaggia (HDFC) - There are many different banks with different policies of lending.
Ms Sachdeva (Planet Finance) – The RBI is not mandating the banks to share individual data. The credit bureau is not getting the data from the banks. Mainstream banks are giving that data to CIBIL…how do we move ahead and can we do some advocacy to move the RBI?
Mr Jaggia (HDFC) – Data has to be from the group and the individual. Sa-Dhan and IBA/RBI have to push the banks to provide this data. HDFC has the capability to provide that data and are open to doing so.
Mr Raymond (IFC) – There are two approaches that we can take – one is the regulatory approach. It can be mandated by RBI/NABARD. But the second approach - even without the mandate, why are banks not coming forward to share this data now?
Mr Patel (Equifax) – All inclusive credit bureau needs to be there and service the end-user. All the stakeholders need to come together.
Mr Joshi (CECOEDECON) – If we have too many credit bureaus we might come into problems regarding pricing. We have to think of how the costs can be reduced. It is more important for the smaller MFIs to register with the bureau – for that costs have to be kept low.
Mr Sridhar (Experian) – SHGs are a complex unit and within the unit we do not know which individual has how much credit. KYC of everyone in the group has to be met but it is difficult. An intermediate solution is to appraise SHPI performance. There is a lot of incentive for group formation.
Mr Raymond (IFC) – whenever CIBs are introduced, there is a drop in credit immediately but then it picks up again after 6-12 months. In India, with a multiple bureau environment, there may be cost barriers. The bureaus cannot realistically share data among themselves since they have invested a lot into their own databases. But the data from the banks and MFIs should be made equally available to all bureaus.
Ms Sachdeva (Planet Finance) – It is a revelation for HDFC bank to say they are able and willing to provide the data. Banks are usually resistant to sharing data and have other priorities.
Mr Sridhar (Experian) – it is not a question of laziness or reluctance but rather, of costliness. Data is stored in hard copy files and for only 1 or 2 members of the SHG/SHPI. If the bank can provide incentives to digitize this data, this can be done. Till now, NABARD has not created any software that enables this which is accessible by SHGs/SHPIs
Mr Jaggia (HDFC) – HDFC uses tablets and those can capture everything in the field. The cost per capture is not prohibitive.
Audience Member - Technology is an issue but we have to at least start at data for the group level. We need training to be able to use the software and maintain our records.
Ms. Sachdeva (Planet Finance) – To summarize and say only one thing, I would say “move to digital”
Audience Question: What about the cost of accessing data?
Banks will have to pay to access the credit history in the CIBs.