Paper

Micro Finance and Credit Information Sharing: Emerging Trends & Key Issues

Moving towards integration of microcredit information sharing
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This presentation describes the various kinds of credit information sharing in microfinance and develops a strategy to better integrate microcredit information.

The presentation states that:

  • Credit information sharing would contribute to:
    • Lower interest rates;
    • More sustainable debt levels;
    • Better access to finance.
  • Credit information sharing would benefit micro-businesses because small loans cost more and debtors have poor collateral and poor proof of income;
  • Essential data qualities include accuracy, timeliness and comprehensiveness.

The presentation:

  • Lists some sources of micro-credit information, such as microcredit institutions, banks and non-banking financial companies, wholesale and retail merchants, public utility companies, etc.;
  • Describes a World Bank study that aimed to address the location and scope of microcredit information sharing.

It presents the market structure of countries with the following, discussing the contributing factors and key issues for each:

  • Microcredit specialized registries only;
  • Micro- and non-micro specialized credit registries;
  • Inclusive credit registries only.

It also presents factors that contribute to the integration of microcredit information. These include:

  • Numbers of formal creditors;
  • Degree of client overlap;
  • Ability to distinguish borrowers;
  • The level of development and scale of operations;
  • Demand for micro-borrower data.

Finally, it recommends measures to achieve better integration, some of which are:

  • Organization of the private sector into associations;
  • Segmentation of portfolios;
  • Education of the public about the benefits of information sharing.