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Strengthening Infrastructure for Financial Systems – Credit Bureaus December 5, 2002

Strengthening Infrastructure for Financial Systems – Credit Bureaus December 5, 2002. Nataliya Mylenko Consultant Financial Sector Operations & Policy The World Bank Tel: (202) 458-5917 Fax: (202) 614-1548 Web: http://econ.worldbank.org/programs/credit_reporting/.

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Strengthening Infrastructure for Financial Systems – Credit Bureaus December 5, 2002

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  1. Strengthening Infrastructure for Financial Systems – Credit BureausDecember 5, 2002 Nataliya Mylenko Consultant Financial Sector Operations & Policy The World Bank Tel: (202) 458-5917 Fax: (202) 614-1548 Web: http://econ.worldbank.org/programs/credit_reporting/

  2. World Bank Credit Reporting Systems Project • Legal reform • bank secrecy, privacy and data protection, consumer rights • Regulatory Reform • Establishment and enhancement of credit bureaus • special emphasis on SME and micro-finance credit reporting • Public Database Modernization • Education and Outreach - consumers, judiciary http://econ.worldbank.org/programs/credit_reporting/

  3. World Bank Credit Reporting Systems Project Research • Surveys of public and private credit registries worldwide, survey of financial institutions regarding their use of credit information 1999-2002 • Book “Credit Reporting Systems and International Economy” edited by Margaret J. Miller, MIT Press, forthcoming in early 2003 http://econ.worldbank.org/programs/credit_reporting/

  4. World Bank Credit Reporting Systems Project 2002 Global survey of private credit registries jointly with “Doing Business” project at the World Bank • Goal: Understand how to improve the environment for credit information firms and private sector development • Comprehensive assessment of credit information availability across countries • More than 100 countries around the world • Directory of credit reporting firms http://econ.worldbank.org/programs/credit_reporting/ http://rru.worldbank.org/doingbusiness/

  5. Credit scoring –efficient use of credit history information • Credit scoring is a statistical method used to predict a probability that a borrower will default or become delinquent. • Credit scoring was introduced in consumer lending in 1950s • Since early 1990s credit scoring was applied in SME lending

  6. Efficiency gains from using credit registry information

  7. Percentage of Banks which consult a credit registry for small business loans

  8. Public vs. Private Credit Registries

  9. Who submits information to public and private registries?

  10. Firm data collected by public and private registries

  11. Cost and time savings from credit reports and credit scoring Some case studies: • A bank in Canada: processing time decreased from 9 days to 3 days, in 18 month since scoring was implemented • A bank in US: processing time decreased from 3-4 weeks to a few hours. • A bank in Netherlands: processing time decreased from 8-10 hours to 15 minutes for existing clients and 45 minutes for new clients • A bank in the US: average cost of processing a small business loan decreased from $250 to $100 after implementing scoring system

  12. Survey of Latin American Banks -importance attached to credit reporting

  13. Efficiency gains from using credit registry information

  14. Percentage of Banks which consult a credit registry for small business loans

  15. Public vs. Private Credit Registries

  16. Who submits information to public and private registries?

  17. Firm data collected by public and private registries

  18. Status of credit reporting around the world • Maps indicating development of credit reporting in private and public sector across all regions of the world can be accessed at: http://econ.worldbank.org/programs/credit_reporting/topic/16017/

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