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Credit confidential

Credit confidential

Regional governments could realize significant benefits from the creation of a stronger credit culture, argues Katherine Azmeh.


May 16, 2010 2:06 by

In many western countries, a credit report is the punch line for endless jokes. We dramatically play up its ominous overtones – one misstep and a bad “credit rating” could haunt you for the rest of your life. As first time home buyers, we are either beaming with pride or scandalized with shame, sitting in front of a mortgage broker, examining our options for a home loan. We are rewarded or penalized according to our “credit history” and its tale of misdeeds or financial prudence.

Good credit qualifies borrowers for better terms on loans, access to more capital, and quicker turnaround of the whole process – all of which can be vital to homebuyers. And viewed in the wider context of the business environment, the implications can be just as far-reaching.

Lowering “barriers to entry” for new business, for instance, means advancing reforms that make it easier to do business. This includes initiatives like lowering capital requirements and easing the acquisition of permits for business registration, start-up, and new construction. It also means providing easier access to capital.

Access to capital: it sounds simple enough. But for much of the region, a scientific approach to accessing startup money is a work in progress. The concept of a credit history is relatively new – and it is long over due.

Unlike in other regions, central banks play a major role in credit reporting in the Middle East; they either operate the credit registry directly, or assume responsibility for regulation of credit reporting. The consumer credit culture is much less developed than in other regions, and governments would realize significant benefits from the creation of a stronger consumer credit culture.

While researching this story, I called three local bank representatives and two credit-reporting agencies to get answers to some very simple questions (about credit data collection and the use of credit history data in determining access to loans). In every case, calls either went without a response, or bank personnel were not responsive, knowledgeable, or willing to be quoted for this article.

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