A credit Reference Bureau (CRB) is soon to be opened in the country. The bureau will be responsible for providing accurate information on borrowers’ debt profiles and repayment history, which has been a duty for banks.

François Kanimba, Governor Rwanda National Bank said that, Compuscan Information Technologies, a South African company will be hired to conduct the business model for Rwanda.

"It will help mitigate banks’ risk to private lending,” Kanimba said.

He believes it will also improve Rwanda’s position of doing business by facilitating information dissemination on banks’ clients’ credit worthiness.

"As you very well know, credit information index is the main hindrance for doing business in Rwanda,” Kanimba said.

A steering committee comprised of members from banks, Rwanda Export and Investment Promotion Agency (Riepa), National Social Security Fund (NSSF) and Rwanda Enterprise Investment Company (REIC) is to be set up.

He however did not specify when this plan will be implemented saying a number of things like the legal framework and funds must be in place.

He added that the African Development Bank has reached an agreement with the Rwandan government to fund such activities.

Experience has revealed that when financial institutions compete with each other for customers, multiple borrowing and over-indebtedness increases loan default.

However this is not the case when financial institutions have access to databases that capture relevant aspects of clients’ borrowing behaviour.

Reduced default rates are expected since borrowers will seek  to protect their reputation by meeting their obligations in a timely manner.

In the long run, a bigger credit market and lower default rates will lead to lower interest rates, improved profitability and increased competitiveness.

Hannington Namara, marketing and communications manager of Rwanda Commercial Bank (BCR) acknowledges the benefits of the credit reference bureau to the Rwandan community but says Rwandans are rather disciplined.

"It’s a small market and we intend to know each other. Therefore it makes it a bit difficult to default,” he said.

With the total balance sheet for commercial banks growing by 43 per cent from Frw275.5 billion in 2006 to Frw393.7 billion in 2007 and the credit distribution growing by 26.6 per cent, is even expected to improve.

This is because the CRB will add considerably to reduction in the costs of screening loan applicants. Compuscan is a risk information company that is currently helping Uganda set up a credit reference bureau.

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