Notwithstanding improvements to Ghana’s credit referencing system, the central bank has indicated that some financial institutions have refused to subscribe to credit bureau services, contrary to the Credit Reporting Act 2007 (Act 726).

This has been prevalent among the rural and community banks (RCBs) as well as microfinance institutions (MFIs).

The Bank of Ghana (BoG) stated in its latest credit referencing report that the low usage of credit reports emanates from the lack of understanding among financial institutions of the usefulness of credit reports.

Section 26 of the Credit Reporting Act mandates all financial institutions to obtain credit reports on all prospective borrowers prior to granting or refusing a credit facility application.

“Some financial institutions, especially rural banks, conduct credit searches only on their commercial customers or first-time borrowers, or once on regular customers,” the report said.

Across the financial sector, credit enquiries for the purpose of credit application constituted 74 percent of total enquiries. Financial institutions’ use of credit bureau services for credit monitoring purposes increased by 12 percent in 2019 compared to the previous year.

The central bank said continuous use of credit reports for monitoring portfolios will enable lenders adequately foresee and mitigate potential adverse credit risks.

In view of the challenge that is limiting the optimum performance of the credit referencing system, the BoG intimated that it will mitigate this challenge by administering penalties for breaches through the Credit Reporting Regulations.

Credit bureau usage

As at December 2019, the total number of records in the database of credit bureaus stood at about 23 million. This included both credit and non-credit information, with about 22 million individual records and 716,736 corporate records.

The non-credit information includes information in the public domain, ID information, and company data.

There was a total of about five million unique borrowers in the credit bureau database, with individual borrowers accounting for 96 percent of total borrowers.