• Monday, May 20, 2024
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Protecting lenders from loan sharks


Ikechukwu Eze

Credit, when not abused, is a wonderful instrument for turbo-charging an economy, yet for most economic operators in sub-Saharan Africa, accessing credit is as difficult as squeezing water out from the rock. In most parts of the continent, people pay cash for purchases or else they have to prove that they have assets to underwrite any credit applied for. The absence of readily-available consumer and commercial credit has for a long time emasculated the rate at which African economies grow.
There simply cannot be any system of national credit extension without the risk-regulating services of credit bureaus. As intermediaries they provide products and services that help customers alleviate business credit risks. It is to fill the vacuum that the absence of credit bureaus has created in Ghana, that George Ahiafor, a seasoned banker and financial expert, decided alongside friends of like mind to establish XDS Data Limited in November 2003.
Ahiafor, after almost two decades of working in the financial sector in the United States and Singapore, returned to Ghana with a vision to make the process of securing loans easier for Ghanaians. XDS Data is the first credit reference bureau that has been licensed by the Bank of Ghana to operate under the country’s Credit Reporting Act of 2007. A privately owned company, XDS Ghana is jointly owned by XDS South Africa, Databank Financial Services Ghana Limited and Debenture Trust Ghana Limited.
The company’s focus is in the banking, retail, insurance, micro-lending, telecommunications, fraud and legal services sectors. Its goal is to see that both the lenders and those seeking loans are confident to engage one another in business. While the idea has taken time to sink, Ahiafor is happy today that most banks and auxiliary financial institutions in Ghana are now receptive to the need for credit bureau and are signing on to XDS services.
The whole idea is to make it possible for you to get credit when you need it. A credit bureau is an organization that maintains credit information on people in order to make available their credit status to relevant parties especially lenders who want to give them a loan. Financial institutions send data on their credit customers to us on monthly basis. We have software that processes the data into credit information. Credit bureaux do not grant credit nor make credit decisions. They are only custodians of data that enables financial institutions make informed decisions.

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A credit bureau is high-volume low-margin business and has many interdependencies with the entities submitting the data, with those using it and with numerous other elements in the broader economy. For XDS Data Ghana, one huge asset it has going for it, is the experience of its leadership and the credibility of those on its board.
In May 2004 the Ghana Association of Bankers appointed the company to help develop a functioning credit referencing system for the banking community. Since then XDS has conducted intensive feasibility studies and market analysis to enable it understand the challenges faced by various data providers. In accordance with the association’s directive Ahiafor and his team have provided a standard data format and embarked on data collection activities from banking and non-banking financial institutions, utility and retail companies and made helpful suggestions as well as offered practical assistance to many banks on the importance of quality data for efficient referencing system.
The establishment of XDS Data Ghana involved unique difficulties, as there is no well-developed credit culture in the country. As pioneers in their industry, XDS Ghana made contributions towards the drafting of a legislative framework for the Credit Reporting Bill. Xds data helped defend the Bill before the finance committee of Parliament. In October 2006 this Bill was passed in to law. In recognition of its contribution towards the establishment of credit referencing services in Ghana, the Bank of Ghana issued the first license to XDSData in December 2008.

Despite the initial challenges, Ahiafor is delighted the credit bureau industry has finally come to stay in Ghana and XDS is leading the way. A graduate of the State University of New York, Ahiafor served on the team to implement the Bank of Ghana payment systems, a clearing system now in operation among the Banks. He was a member of the project team responsible for coming up with a framework for the implementation of the West African Payment Systems.