Alternative consumer data can help drive financial inclusion in Namibia
By Lara Burger
Country manager for TransUnion, Namibia.
While there’s not yet a measure of how many credit-eligible consumers there are in Namibia, we estimate that just 360,000 credit-eligible Namibian consumers are visible to banks and other financial service providers through credit bureaus.
This means that approximately 1.2 million adults in the country are likely to encounter challenges when they apply for products or services that will facilitate the financial inclusion they need to participate more actively in the country’s economy.
Namibia is not alone in having most of its population not included in a credit bureau – in many regions, fewer than 10% of adults have a credit report. Consumers continue to face economic headwinds, with many likely to need access to microfinance or retail credit. These are the credit products that could improve a consumer’s lifestyle or facilitate access to further education – or even secure the loan an entrepreneur needs to launch a new business.
Being able to assess a borrower’s credit profile gives financial services providers a powerful picture of the consumer’s past payment behaviour and credit utilisation, which is, in turn, a strong indicator of how they’ll manage their payment requirements in the future. That gives lenders the tools they need to confidently assess risk – and it inspires borrowers to repay their credit products on time.
Credit reporting must happen within a clear legal and regulatory framework, such as the Credit Bureau Regulations: Bank of Namibia Act of 1997 and the Bank of Namibia’s Credit Bureau Regulations of 2014. Having a context like this for credit reporting means that consumers can trust the reporting process and that they can believe that their rights are protected. Having this confidence in the process means that they are more likely to take advantage of the opportunities made possible by credit products.
Conversely, a well-legislated credit scoring and reporting environment and constitutionally protected rights to privacy further build an environment of trust that attracts investors and other financial services providers.
What data do credit bureaus collect?
Credit bureaus[i] collect financial information about consumers, including the number of credit facilities they hold, repayment periods, and interest rates, along with personal identifying information such as their name, address, identity number, and employment details. Other information they gather includes credit history and payment behaviour, and details of institutions that have requested or performed inquiries in a consumer’s name.
The law requires credit bureaus to keep consumer information confidential, and they cannot share it without a consumer’s prior consent – something that’s sought and obtained when a consumer applies for a credit product. In the interests of fairness to consumers, a bureau can only retain the details of adverse consumer behaviour for one year, while it can retain positive credit information (information that provides insights into the behavioural credit profile of the consumer, such as: paying bills on time, maintaining reasonable amounts of unused credit, etc,) for an unlimited time.
How can consumers with no credit build their credit profile?
If financial inclusion is made possible by consumers being able to manage and build a credit profile by managing their credit portfolio in a positive way, those who don’t yet hold any credit products must surely wonder how they can begin to build their credit profile.
Credit bureaus like TransUnion have been proactively addressing this question and are working with regulators to find ways to include alternative data sources into a consumer’s record, to help them build a credit profile.
This alternative data could include a consumer’s track record of paying utility accounts, with some countries even using telco data such as reloads, payments, mobile data usage, and device data to accurately score consumers with little to no formal credit data.
Including alternative data into a continuously expanding database that includes alternative scoring partners alongside traditional lender credit bureau data means that even unbanked (households without a cheque or saving accounts) or underbanked (households who primarily use cash and alternative financial services like check cashing) Namibian consumers and businesses can build a credit profile.
Creating and introducing new insights into consumers’ credit profiles means that more people can participate in the formal financial system, giving them access to the financial services they need to improve their lifestyles, build businesses, and contribute to the growth of the Namibian economy.
