Ghana Demands Consumer Lending Data From Non-Bank FIs

Bank of Ghana is promoting a more transparent credit-lending system in Ghana, and has announced that all non-bank financial institutions must now submit relevant information and consumer data about all borrowers to credit reference bureaus.

According to GhanaWeb, BoG additionally requested that the institutions adhere to the directive for referencing before they make a decision to provide credit loans to customers.

Boyd Donkor, assistant director of the Banking Supervision at BoG, made the announcement at a financial product launch in Accra last week.

GhanaWeb reports Donkor explained the three credit bureau establishments in Ghana had been properly licensed with a mission to  “ease credit referencing and also reduce information asymmetry, which has characterized the financial system.”

Ghana had previously suffered from a poor lending system that had a high loan default rate. The adverse lending system drained the country’s banks and other financial institutions, putting them in a precarious position.

Some customers were taking advantage of lenders, and used the same collateral or documents to get multiple loans from various banks. As a consequence, individuals were unable to repay what they borrowed and high non-performing loans increased. Banks in Ghana collapsed and needed solutions fast.

The credit bureaus will help to allow for easy data tracking and help financial institutions determine if borrowing parties are capable of paying back loans.

Donkor said credit applications must be thoroughly screened and must measure up to the required policies. He stated that these practices were not only important, but also necessary for the banking system’s survival.

The credit bureaus must ensure that the timing and individuals applying are both appropriate for the requested loans. Furthermore, Donkor insisted that the credit given must also be an adequate amount and be able to provide enough for the borrower’s intended purpose.

He told GhanaWeb, “Where credit evaluation is solely based on the assessment of the individual’s ability to pay, but does not adequately consider the use for which it is being sought out, it may result in the amount granted being insufficient.”

Donkor added, “Effective monitoring and control is necessary to ensure that early warning signals are identified and rectified before things get out of control”

To read the full story at GhanaWeb click here.