LUSAKA/LAGOS (Reuters) -
When Joyce Musonda wanted to start a business two years
ago selling kitchen tiles from her backyard in an
up-and-coming district of Zambia's capital of Lusaka,
she braced herself for a battle to find a start-up loan.
Her predicament is common: around 80 percent of sub-Saharan adults
have no bank accounts and struggle to access finance from banks
reluctant to lend to new customers, especially the small
entrepreneurs for whom they have no history.
Musonda's solution came from an unexpected quarter: she discovered
that Zambia - wanting to encourage more middle-class business people
like her - had set up a credit bureau to record her credit history
and show her to be a reliable customer.
Within days, the bank had approved a $3,000 loan. Musonda now does
brisk trade from the 20-foot steel container packed with
Chinese-made floor tiles and roofing that sits in the yard of her
freshly painted Lusaka home.
"Before the credit reference bureau I don't think I could have been
granted the loan with such ease," said the 37-year-old.
Zambia's credit bureau, set up five years ago, still only has data
on 12 percent of the population, according to the World Bank. The
numbers are even lower, or non-existent, in other African countries.
But gradually, at the urging of the World Bank - which has
introduced programs in 19 sub-Saharan countries to promote the
growth of credit bureaus - Zambia and other countries are doing
more.
Making more entrepreneurs visible to banks not only increases the
number of loans but in turn lifts the larger economy and creates
employment - the ultimate goal.
"When there's little information, then there's little financing,"
said Luz Maria Salamina of the International Finance Corporation (IFC),
an arm of the World Bank.
"When you extend credit to a very small company or business and they
expand their services, they impact society and they create jobs,"
added Salamina, who leads an IFC program to promote the growth of
credit bureaus in sub-Saharan Africa.
MAKING IT FORMAL
Loans from banks and micro-lenders also play a major role in
bringing cash-based small businesses - the so-called informal sector
that isn't usually taxed - into the formal economy.
The informal sector accounts for 55 percent of the economic output
in Sub-Saharan Africa and 80 percent of the labor force, according
to the African Development Bank.
In Nigeria alone, home to one of the continent's biggest informal
sectors, the IFC expects its credit bureau push to help create $5.1
billion in lending to small businesses in the next three years.
That's an attractive prospect for investors, and some are now
stepping up for a slice of the action.
Private equity firm Actis this year took a stake in South Africa's
Compuscan, which operates credit bureaus in Africa.
"In many African markets the only way to get credit is if you have
some sort of physical asset that can be used as collateral, or you
are a well-known person," said Frank Lenisa, a director at Compuscan.
"A credit report provides the consumer with another type of asset,
what we call reputational collateral."
A side-effect of this, bankers say, is that customers now tend to
pay off their debts more readily in order to protect their record.
Most African credit bureaus only provide rudimentary data, but that
still helps banks size up potential borrowers.
"It helps you take a risk with your eyes wide open," said George
Akello, Standard Chartered's <STAN.L> credit officer for African
retail banking
LEARNING PROCESS
On the diesel-choked streets of Nigeria's biggest city, Lagos, the
reach of the informal economy is plain to see: women sell bags of
drinking water and young men hawk "Nollywood" DVDs and paperback
copies of "Think and Grow Rich".
With the help of more credit bureaus these street hawkers could be
the next small-scale entrepreneurs, analysts say.
That said, rolling out the bureaus is easier said than done, and
growth in many markets is slow.
Compuscan has had to come up with work-arounds in Uganda where there
are no national ID numbers, and instead introduced biometric cards
to track borrowers.
And among the banks themselves there is sometimes a reluctance to
understand why sharing of their customers' credit data can make a
difference to their business.
"It is still very much a cash-based economy," Compuscan's Lenisa
said. "Until they actually get together and love data it's still a
learning process."
Her predicament is common: around 80 percent of sub-Saharan adults
have no bank accounts and struggle to access finance from banks
reluctant to lend to new customers, especially the small
entrepreneurs for whom they have no history.
