The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

An Inter-American Development Bank (IDB) economist has urged The Bahamas to go beyond its proposed credit bureau by establishing a credit registry to enable better lending decisions.

Diether Wolfgang Beuermann Mendoza, lead economist for the IDB's Caribbean Country Department, told Tribune Business that credit registries - an information repository where details on new and existing borrowers are held - are absent from virtually all Caribbean countries.

Mr Mendoza said The Bahamas and other nations in this region face a "high level of asymmetric information in credit markets", with lenders unable to precisely determine which borrowers present 'good' risks and others who have a history of loan delinquencies.

"One type of institution than ameliorated this asymmetric information, and which has been shown to facilitate access to credit and reduce also the cost of credit, is a credit registry, or credit bureaus, where they can collect all information on potential borrowers and see in a clearer way the riskiness of the borrower," he added.

The Bahamas’s credit bureau, which was licensed at the end of 2019, is now setting up operations and is to begin obtaining information from banks and other lending institutions by the 2021 second quarter so that it can begin the lengthy process of compiling credit reports.

The 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.

However, Mr Mendoza suggested a credit registry would be more effective than a credit bureau as it would have access to more information sources.

He explained: “So far, in the Caribbean, we don't have any country that has implemented a credit registry. A registry that could put together all the information, both public and private, that could be available for the level of payment of services like water, electricity or paying taxes.”

Mr Mendoza said countries such as Guyana, Trinidad and Tobago and Jamaica all have credit bureaus that are “similar” to the structure proposed for The Bahamas, but all are privately owned and lack the participation levels and information sources of a credit registry.

"As a result, the coverage of these credit bureaus in other Caribbean countries only covers 30 percent of the available actors in the economy, and do not give a robust enough sample size to have a macro-economic look at the country’s credit profile," he added.

Elsewhere, Mr Mendoza said The Bahamas must focus on “multi-year budgeting processes and a multi-year fiscal framework” that would take into account a longer-term planning horizon. He called for the continued development of the Central Bank Act, comparing The Bahamas to other Caribbean countries, such as Barbados and Jamaica, who have recently revised similar legislation to bring them in line with larger and more developed countries.

Mr Mendoza said: “In terms of financial regulation, one thing that we highlight is the need for more integrated financial regulation beyond the micro-prudential approach. On the macro side, it is trying to prevent system-wide credit crunches through the implementation of conservation buffers going forward in ameliorating pro-cyclical policies of credit access and going towards more countercyclical policies of credit access, which would weather the storm better in crisis sense of the world we live now.”