By NEIL HARTNELL
Tribune Business Editor
Around 90 per cent of the Bahamian workforce have existing loans to service, although the number of active accounts has declined by 12.7 per cent over a five-year period.
These data were contained in the newly-published tender document issued by the Central Bank for the Bahamas’ first-ever Credit Bureau, showing that nine out of 10 persons in this nation’s 195,00-strong labour force have active loan accounts.
However, showing just how difficult it has been obtain new credit since the 2008 recession, and subsequent non-performing loan spike, the Credit Bureau tender shows active loan accounts fell from a high of 266,692 in 2009 to just 232,761 in 2013.
The steepest decline, over that five-year period, came between 2009 and 2010 at the recession’s peak, when the number of active loan accounts fell by 17.2 per cent to just 220,720 in the latter year.
Much of this decline was clawed back in 2011, when active loan accounts grew by 17.4 per cent to 259,061, but the following two years saw falls of 4.9 per cent and 5.5 per cent, respectively.
The Central Bank tender requires all bids to be submitted by February 23, 2015, with ‘site visits’ and presentations by shortlisted bidders occurring before the winner is selected in May 2015.
The Central Bank said it would permit a “Hub and Spoke model, where the core platform resides outside of the territory of the Bahamas, leveraging shared services”. Any remote data centres, it added, needed to be accompanied by a physical presence in the Bahamas to interact with the banks and other information providers, and ensure the proper provision of services.
The Central Bank, in outlining the rationale for a Credit Bureau and accompanying legislation, said Bahamian commercial banks issue “more risky loans” because they do not have full information on borrower creditworthiness.
Implying that this had exacerbated the sector’s $1 billion-plus non-performing loans, the Central Bank suggested the long-promised Credit Bureau would help “mitigate” a situation where more than $1 out of every $5 lent by banks is in arrears.
“In the current lending environment, lenders are making credit decisions on less than full information on borrowers’ indebtedness, which leads to more risky loans being extended,” the Central Bank warned.
“A credit reporting system would provide banks, non-bank financial institutions and other lenders with additional tools to evaluate the creditworthiness of their customers and to better equip the Central Bank to carry out macro-prudential monitoring of the economy.”
The Central Bank listed the advantages of a Credit Bureau as “a reduction in lenders’ exposure to risky loans, mitigate their non-performing loans rates and make the credit decision making process efficient”.
This, it added, would result in “improved access to credit, and to a range of financial products by consumers on more favourable terms and at competitive interest rates, thus reducing their borrowing costs”.
And the regulator suggested a Credit Bureau would impose “a measure of discipline on debtor behaviour, thus reducing the level of consumer indebtedness and the number of non-performing loans in the financial system”.
Credit Bureaus collect personal and financial information on persons and companies, and then issue this to client lenders via a credit report. A Credit Bureau’s clients typically include banks, mortgage lenders, credit card firms and other financing companies.
Banks, insurance companies, financial and corporate services providers, credit unions, the Bahamas Mortgage Corporation and other mortgage lenders will be required by law to provide information on their borrowers to the Credit Bureau, the Central Bank said previously.
It “may require” other credit providers and utilities, such as the Bahamas Telecommunications Company (BTC), Cable Bahamas, the Bahamas Electricity Corporation (BEC), the Water & Sewerage Corporation, plus retailers who sell on hire purchase; the National Insurance Board (NIB) and the Companies Registry to supply client details.
The Bills “afford consumers rights” when it comes to data protection and privacy, while a National Credit Reporting Review Commission will be created to hear consumer appeals and review the Credit Bureau’s actions.
Among the information provided by a lender to the Credit Bureau is the nature and amount of the loans granted to a borrower; the security taken for them; nature of any guarantees; and any information on the borrower’s income, creditworthiness and financial transaction history.