Revised Credit Reference Bureau regulations to ease access to loans

Access to credit in Uganda remains expensive due to the absence of an efficient and transparent system of scoring credit worthiness. Photo / File 

What you need to know:

  • The guidelines, which are a revision of the 2005 Regulations, among others, seek to change Uganda’s borrowing landscape as well as create an efficient way through which lending institutions gather credit scores to improve loan repayment and accessibility.

Bank of Uganda has said the recently issued Credit Reference Bureau (CRB) Regulations, 2022 will ease access to loans, especially for low income earners. 

The guidelines, which are a revision of the 2005 Regulations, among others, seek to change Uganda’s borrowing landscape as well as create an efficient way through which lending institutions gather credit scores to improve loan repayment and accessibility.

Speaking during the Bank of Uganda Financial Stability Symposium in Kampala, Dr Tumubweine Twinemanzi, the Bank of Uganda executive director supervision, said that many people, who have the ability to repay loans, have been blocked from accessing credit because they have no collateral and lack sufficient ways through which they can be scored. 

“In case one wants to start a Rolex stand and needs Shs1m, he has no collateral. However, if he has paid his rent and Yaka bills on time for the last two years, why shouldn’t that be counted as part of his character [credit score],” he wondered, noting that under the new Credit Reference Bureau (CRB) Regulations, persons will be measured on a number of parameters, which will be used to measure their credit score.  

The regulations provide for a wider and clearer definition of credit information that can be used to score someone credit worthiness. 

Such information includes a person’s credit history, financial history, employment history, identity, financial securities, and any other information relating to the assessment and determination of the credit profile or history of a person. 

This is a much broader definition of credit information, which previously only referred to the history of an individual with regard to credit and financial obligations that a Credit Reference Bureau could collect from financial institutions or microfinance deposit-taking institutions. 

The regulations also provides for use of national identity or alien cards to track borrowers credit history and onward assessment. 

Bank of Uganda last month issued a circular to all supervised financial institutions directing that all existing and future borrowers must now be identified by their national identification or alien numbers instead of financial cards, which limit access to loans. 

Dr Tumubweine noted that making a lending decision is based on a person’s capacity and willingness to repay, which calls for a more efficient way not to lock out those with the stated requirements.  

“One may have the capacity to pay but is unwilling. However, when one knows that failure to make that payment negatively affects their credit score, leading to failure to access any other loan facility, they will want to keep it clean,” he said, adding that the moment Ugandans start becoming accountable for their credit, the price of accessing a loan will also reduce. 

Access to credit remains high due to a high risk profile and a high rate of default. 

With no credit information, financial institutions have previously used one’s ability to repay in order to access credit.

High risk profile

According to Dr Tumubweine making a lending decision is based on a person’s capacity and willingness to repay, which calls for a more efficient way not to lock out those with the stated requirements.  

“One may have the capacity to pay but is unwilling. However, when one knows that failure to make that payment negatively affects their credit score, leading to failure to access any other loan facility, they will want to keep it clean,” he said.  

Welcome!

You're all set to enjoy unlimited Prime content.