Download Слайд 1 - Topic: Economic Growth

Developing a Successful Credit Bureau
Case of Kazakhstan
USAID/The Pragma Corporation
Financial Sector Initiative
2001-2005
Regional Conference on Credit
Reporting in Africa
October 5-6, 2006
Cape Town, South Africa
Javier M. Piedra
The Pragma Corporation
Kazakhstan
GDP Growth (Percent)
………….……..10%
Population, total (millions)
……………… 15.0
Surface area (sq. km, 1000’s) …………. 2,724.9
South Africa
GDP (Percent)
…………........5%
Population, total (million) ……….47.0
Surface area (sq. km, 1000’s) ...1,220
Kazakhstan's economy has performed strongly over the
past half decade.
A rapid expansion in hydrocarbons production, supported by a prudent macroeconomic policy framework, has led to major
economic and social gains. Bank lending has increased by over 50% in each of the last two years.
Sources: The National Bank of Kazakhstan and the Agency of Statistics of the Republic of Kazakhstan.
1The Gini index is a measure of inequality, with 0 representing perfect equality and 100 representing complete
inequality.
Kazakhstan Credit Bureau
The Historical Record
Staffing and Partners
USAID/The Pragma Corporation – Financial Sector Initiative
Objective: Develop a best practice state-of-the-art
private credit bureau
• Fulltime in-country staff hired
• Legal, Corporate Finance, IT Departments + Administrative Support
• Full-time Senior International Consultant
• Additional International Consultants, when needed
• Partners – Identify key market drivers
• National Bank of Kazakhstan (Primary)
• Financial Supervisory Agency (Primary)
• Association of Financiers (Primary)
• Private Banking Sector
• Non-Banking Sector
• Multilateral Banks
Target
95/75 Rule
Major Benchmarks & Timeline
2001 - 2006
1.
USAID/The Pragma
Corporation and National Bank
of Kazakhstan (September
2001) begin activities
9.
2.
Feasibility Study (November
2001)
11.
Tender Process Begins
(August 2004)
3.
Business Plan (Fall 2002)
12.
4.
Central Asian CB Conference
(January 2003)
International Technical
Operator Selected (January
2005)
5.
Negotiations with Government
(2002-3) regarding law
13.
Begin to draft Regulations
(November 2004)
6.
Parliamentary Debates (2004)
14.
Pilot credit report (October
2005)
7.
Investor In-country “Road
Show” (April 2004)
15.
8.
Business Plan update (spring
2004)
receives
Operating License (November
2005)
16.
sells first Credit
Report (January 2006)
Law Passes (July 2004)
10.
established (July
2004)
Key Selling Points for Success
Financial Sector Initiative
• 100% independent
• No interest in ownership or “pushing” US
business
• Professional qualifications and staff
• Leadership role within the market, managed
overall process and executed a “Dual Track”
parallel implementation strategy.
• Follow through consistent and on-going
In Kazakhstan, no one in the market said: “FSI, you make
good points about CBs but what are you really selling?”
FSI had enormous credibility
Market faced with Serious Barriers
(2001 – 2003)
a) No clear legal basis for data sharing and/or
for the protection of consumer privacy.
•
•
No law existed and early drafts envisaged mandated transfer of
personal data to CB without consumer consent – a non-optimal
solution.
Regulatory “overreach”, as appeared in early drafts of the law,
threatened a private CB’s operational viability.
b) Data sharing viewed as impossible.
•
•
Bank Secrecy and reluctance to share proprietary client data
for competitive reasons. Data fragmentation a huge problem
The Government initially decided to take a stake in a private
credit bureau to facilitate data sharing. Ownership would have
been temporary – a non-optimal solution.
Our Message
Credit Bureau
A powerful stimulus to
internally-generated growth
through removed
information asymmetries in
consumer lending.
Increased access to credit
Reduction in interest
Rates
Reduction in collateral
requirements
Increase loan term
Lower default rates
More responsible
borrowing
Better Risk
Management
Message repeated constantly in different ways
Primary Beneficiaries:
“the economically less fortunate, small
businesses, the young and elderly, and
those located in farming areas and
villages”.
Primary Message to Government and Elected Officials
Source: Dr. Michael Staten, Testimony
before US Congress, May 8, 2003
Legal Challenges

Removed government’s tendency for legal and
regulatory “over-reach”
– Balanced a) the need to protect the confidentiality and
privacy of information with b) the need for adequate
information flows

Removed the government’s initial inclination to own
the credit bureau
– Private Sector does a better job than the government in
providing clients with CB services
– Banks will share information without the NBK taking an
ownership position in the CB
We spent much effort on these issues and insisted to our
counterparts “to get it right or the Law will not work”
Passage of CB Law
1. Various versions of a new Credit Bureau Law
a) Draft and Sign-off from GOK Ministries for
Presentation to Parliament (24 months)
b) “Final” draft in March 2004
2. Parliamentary Debate
a)
b)
c)
d)
Working groups
Visit to Experian (UK) headquarters
Presentations to Parliament
Cont’d Working groups to remove “viruses”
Most “Viruses” in the Law were removed in long working group
meetings with the National Bank and the Supervisory Authority
before it reached Parliament.
Credit Bureau Law Approved (July 2004):
a) 100% private in a free market competitive system;
b) Consumer consent required
c) Data sharing of positive and negative data permissible;
d) No data fragmentation;
e) Open system – all major sectors of economy may
participate
f)
Supervisory body will implement “minimum
requirements” for data regulation;
g) If consumer “Opts-in” then bank mandated to transfer
data to CB
We argued that the Law should conform to international best
practice and to EU Directive 95/46 at a minimum. Set high
benchmarks which were eventually accepted.
established July 2004
Strategic Objectives
To Become the Leading High Tech Credit Bureau
Provider in Kazakhstan & Central Asia
1.
2.
3.
4.
5.
6.
7.
Maintain healthy bank portfolios;
Increase access to credit
Protect consumers by helping them manage risk
Enhance information sharing and bridge lenders and borrowers
Improve portfolio management
Limit fraud
Profitability and return on capital for investors (“Road Show 3/2004)
Launched “Road Show” to convince investors
Ownership Process

Banks Signed MOU
– Banks commit to invest without specifying the amount
– Banks assured will be professional technical management
– Banks assured will be continuing TA from USAID/Pragma

Timing – MOU signed immediately after:
– the CB Law passed,
– Investor “Road Show” completed
–
“established” as legal entity

Ownership differences settled before
established: HOW?
– Are you “in” or “out”? – because we are moving forward!
– Hold outs realized that they couldn’t develop a CB on their
own
– All major banks sign MOU thus avoiding ownership issues
and data fragmentation
of Kazakhstan
Founders:
7 major KZ banks + 1
Fin. Co. + CreditInfo
Ownership
100% private
Data sharing:
Positive & negative
Coverage:
All Kazakhstan
No equal distribution of shares although
that was original idea
Tender Process for International
Credit Bureau Operator


Bidding Process
Participants:
Proposal’s
 Deadline
 Presentations:
 Shortlist
 Site visits
 Final decision
August 2004
CreditInfo Group, D&B,
Experian, KSV/SHUFA
October’15
October 25 – 30
November’04
December’04
January’05
Conveyed the idea that technical
assistance is absolutely necessary and that TA should be
priced on a commercial basis. No need to “cut corners”.
Building the
November’05
CB received License
December’05 – to the present
Loading data from the clients (currently covers 10% of
active population + 5% of companies)
January’06
First Commercial Contract signed (currently 35)
March’06
First Commercially Credit report Sold
Managed Creditor expectations: Data loading process is difficult
and time consuming. FCB has excellent management team.
Sources of
Data:
Financial Institutions
Mandated to Provide
Data – if customer “optsin”
Public/Government Info
Information
Private Business
Phone & Utilities,
Satellite & Cable, TV
Providers, etc.
Insurance companies and
others
Users (Clients)
Any company or organization
extending credit (Banks, Retail,
Phones & Utilities providers, etc.)
Marketing oriented companies
Insurance (Fraud Detection),
Mortgage Lenders (KMC)
Product Offerings by
1. Consumer Credit Profile
2. I.D. Confirmation, Inquiries, application
processing
3. SME/Micro-Finance Credit Profile
(Commercial)
4. Insurance Profile (expected 4th Q 2006)
5. Fraud Alert and Prevention Services (in
development)
6. Credit Scores (over time)
7. Enhanced Credit Profile (specialized
products)
Estimated Breakeven (US $) for
According to BP
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
-500000
-1000000
-1500000
Breakeven
2006
Total Revenue
2007
2008
Total Expenses
Capital Paid
off
2009
Total Net Income after Taxes
Construction Continues
Banks
State Institutions
Others
2005
2006
2007
2008
Contract Negotiations with Data Providers and Data Users,
Shareholders, and Government Ministries
On-going Process: Need to maintain professional
excellence and provide products and services to the
market.
Suggested Targets and Success
Put in place the essential elements so that a credit reference
bureau has passed from being merely established to a more
advanced, mature and self-sufficient stage. Regulatory
framework key
Success may occur when the following is in place:
– At least 95% of the financial sector has included “customer
consent” clauses on credit application forms; and
– 75% of historical credit data has been collected in a single
location and public record information accessible to a credit
bureau;
The 95/75 Rule
Lessons Learned




Form full-time independent team with
unbiased approach
Convey consistent message and repeat
Identify key market players and secure buyin at conceptual level
Draft, if possible, stand alone CB Law and
supporting regulations with law-makers.
– Include customer consent requirements.

Be patient and try not to agree to less than
optimal solutions.
Thank you for your attention
Questions
The Pragma Corporation
Falls Church, VA, USA
[email protected]
www.pragmacorp.com
Success based on proven methodology,
management skills and marketing.
Anvar Akhmedov, Director
The First Credit Bureau
Almaty, Kazakhstan
email: [email protected]
www.1cb.kz