CRIB shows the way:

Making credit work

The Credit Information Bureau (CRIB) of Sri Lanka has been a part of the local finance sphere for close to two decades, yet few fully understands its role.

Often, it has been perceived as an authority which may make or break your chances of obtaining credit, from any financial institution, including banks.

CRIB has now initiated a timely exercise to answer some of the most compelling questions that have plagued the public for long.

A thought-provoking awareness campaign has got the public attention and in its wake we met CRIB, Director/General Manager Gamini Karunaratne for an interview.

Excerpts of the interview:

Q: What is the true identity of CRIB?

Like our name implies, we are all about credit information. What we do is maintain credit records of all who have ever availed themselves of a credit facility from a licensed lending institution in Sri Lanka.

We maintain a database of over three million people who have ever taken credit facilities. It is intended to facilitate granting of credit to people by offering lending institutions the ability to assess applications in a much fairer way.

For borrowers, it is meant to encourage better financial planning and stewardship which makes them credit-worthy.

A Credit Bureau is a repository of factual information relating to the credit application and repayment records of Borrowers.

The Bureau provides this information to its members who are lenders or credit providers to help them to determine whether or not the person applying for credit is likely to repay.

In doing this the Credit Bureau helps lenders make better lending decisions quickly and objectively. It also guards against fraud.

The credit report only shows the factual credit data available and does not give any opinion nor indicate or comment whether credit should or should not be granted.

Q: What led to the formation of CRIB and how do you keep tab of so many people?

Our origins date back to the 1980s debt crisis resulting from an excessive number of non-performing loans – CRIB was the result of much-needed remedial action for a credit system in chaos.

The Bureau was set up in late 1990 under an Act of Parliament with a majority shareholding by the Central Bank of Sri Lanka. The balance is taken up by a membership of over 90 constituting banks, leasing and finance companies.

These shareholders are mandated to forward to us, reports of all their borrowers, loans, credit cards and update stipulated payments on a monthly basis. In this way, we keep up-to-date credit records of all who enjoy credit facilities of licensed lending institutions in Sri Lanka.

Q: How does maintaining these records make a difference in the country’s credit system?

Taking is always easier than giving back. For long, people have gotten into the habit of taking credit from one financial institution and when unable to pay back, move onto the next. You could always get a bank report on individuals but how far does it prove that an individual is worthy of being given credit? How would one know whether an individual is one who would repay in a timely manner or not or whether that individual is one who will pay back at all? That’s where CRIB comes in.

Maintaining credit records of individuals is a boon to not just lending institutions - its broader benefit goes to society.

Awareness that somewhere, someone keeps track of one’s credit information lends an unconscious or perhaps conscious push to oneself that you cannot outrun the system forever. If you don’t have a good record, it’s a drawback for you.

An entity looking into credit transactions ensures that the public is more disciplined.

The Credit Bureau is aimed at helping credit providers make faster and more objective lending decisions. This will also contribute to a more competitive credit market place among the credit providers, also customers can expect a faster and more competitive service from the credit providers.

Q: How strongly can one’s credit report affect one’s chances to obtain credit?

Most forget that a credit report is not all that bad. If you are someone who makes repayments dutifully and have a good financial track-record, then your credit report will obviously be the best reference you could have to prove your creditworthiness. This means you can obtain your loans much easily. Every time an individual applies for a new loan or a credit card from a member institution, the member institution has the privilege of getting an on-line credit report of the applicant.

Q: Is an individual’s chance to get credit decided by CRIB?

This is an often asked question and one that wouldn’t be raised if our purpose is understood clearly. We are an information bank. All we do is provide the credit records to the lending institutions and by maintaining such records work towards creating a creditworthy society. It is up to the lending institution to make the final decision. As mentioned earlier, if an individual has a good record, then surely it will help expedite credit decisions in a positive way. We truly believe that individual discipline is a true measure of a greater society.

Q: Are these credit records only available to the lending institutions?

No, these records are available to anyone interested in knowing where they stand – by requesting for a Self Inquiry Report, anyone could find out whether they are considered a reliable repayer and whether they have a good report. The report also allows people to verify if the report is accurate which if not, can affect their next borrowing. If you have a dispute you could then seek redress to correct your report.

Q: How can one obtain such a report?

A credit report or iReport can be obtained very easily by simply filling in a form available at any member bank, requesting for a report. The request is then forwarded to CRIB. We check our system according to the information provided and dispatch a report by registered post. If we do not have info on an individual or corporate, a ‘No-Hit iReport’ is generated.

Q: CRIB was lying-low in the public eye for some time now. What was the main motivation for the campaign you are running now?

The primary purpose of our campaign is awareness. Few understand who we are and what we do and we want to correct the misconceptions. People need to get to know us better so that they could enjoy the benefits that we afford.

The campaign emphasizes that credit records are available on both individuals and corporates and also inform the public that starting February 2010, if one has more than three cheques returned in an account due to lack of funds it will be recorded in their credit reports – that is a new addition.

I think no one will dispute that we need to stop the current dangerous trend. The whole economy could be affected if, for example, more and more people believe they could go on issuing cheques without funds. The menace has destroyed businesses and livelihoods of many hardworking people who have been cheated.

Q: Do you believe we can create a more responsible society and that people could have easy access to borrowing?

This is where awareness plays an important role. People will realize that in their own interest, it is far better to manage their finances and commitments in a responsible manner.

Once, people begin to realize that a good credit report is actually a huge asset that can be built and it can actually encourage growth individually and for the society as well, we will begin to see the real dividends.

The main objective of CRIB is to minimize defaulters and maximize credit penetration and maintain portfolio quality by providing comprehensive credit information pertaining to individual borrowers. In this process we are making arrangements to include other service providers such as mobile phone companies, Telecom, Electricity and Water boards in order to have a wider platform for CRIB.

Q: Who is responsible for inaccuracies in reports?

It is important to note that information available at CRIB is only what has been provided by its shareholders, the Commercial Banks, Specialized Banks, approved Leasing and Finance Companies.

CRIB encourages all who have availed of a credit facility to obtain a CRIB Report at least once in six months in order to satisfy themselves of the accuracy of the information given therein.

If any discrepancy is observed the relevant Bank/Lease/Finance will be contacted for rectification. There is a misconception amongst many that CRIB is responsible for discrepancies in a credit report. CRIB does not interfere with the data provided by the lending institutions and therefore discrepancies observed should be taken up with the respective lending institutions.

Quality of data is a big issue for CRIB. Bank and Financial institutions have a greater responsibility towards their customers to ensure that they send accurate and reliable data relating to their credit profiles.

Credit is expanding and getting riskier with delinquencies rising steady. Therefore risk assessment has now become extremely important.

Q: How will CRIB assist Small and Medium Enterprises (SMEs)?

CRIB recognizes the need to broaden the use of moveable assets as collateral for credit particularly to facilitate the growth of small and medium term enterprises which would create economic enrichment and help empower people.

CRIB has therefore embarked on a novel and challenging task to implement an industry accepted state-of-the-art Secured Transaction Registry (STR) or otherwise called the Movable Assets Registry (MAR) for the benefit of the SMEs in particular and the country and economy in general.