CRIB to release credit scores from next month

• With moving into a new system, CRIB plans to extend release of credit scores to all citizens 
• Non-financial data to be also incorporated into credit reports going forward
• CRIB expects credit scores to increase access to finance for many creditworthy citizens
• Credit scores to lift Sri Lanka’s place on World Bank’s Ease of Doing Business index

By Nishel Fernando

Sri Lanka’s Credit Information Bureau (CRIB) plans to release credit scores of banked citizens from next month onwards, which is to be extended to all citizens by late 2020, with the CRIB switching to a new system.  

The credit scoring system will evaluate the credit worthiness or the probability of defaulting of citizens and firms, which would help the financial institutions extend the lending facilities to their customers based on the credit scores, rather than relying on collaterals. 

“Initially, all citizens and institutions that have taken any credit facility/product from regulated banks, finance companies and leasing companies will have a score. Once the proposed Credit Regulatory Authority Act is enacted, the microfinance institutions (MFIs) will also be added to this list. 

Even the unbanked citizens will have a score once the CRIB switches to a new system, as the non-financial data module is activated in late 2020,” CRIB General Manager Nandi Anthony told Mirror Business. 

The CRIB has chosen Icelandic-origin Creditinfo International GmbH, which is incorporated in Germany and headquartered out of Prague, Czech Republic, as its technology partner, to assist with the score development and to develop the new system. 

He noted that the credit scores would be released from August onwards, with the approval of the CRIB board.

The credit scores will be calculated using an algorithm and it will range from 250 to 900. 

“If you have a high probability of defaulting, the score will be low; likewise, if you have a low probability of defaulting, your score will be high,” Anthony explained. 

The CRIB expects the credit scores to increase the access to finance for many creditworthy citizens and further, the citizens will also be able to demand lower interest rates for credit, based on their credit scores. 

The CRIB is investing Rs.500 million in its three-year plan to switch to the new system by late 2020, which includes activating the non-financial (non-traditional) data module.
Once the new system is in place, Anthony noted that the non-financial data, which includes water, electricity and telecommunication, would be incorporated into the credit reports and credit scores. 

“For an example, we will be collecting utility data, which indicates how you pay your electricity bill, water bill and telephone bills,” he added.

He said that the CRIB has already had discussions with the telecommunications firms and they have shown enthusiasm to share their customer data with the CRIB.

Further, based on the credit scores of their customers, Anthony pointed out the retail outlets could offer credit to their customers as done in the developed countries. 
However, he remarked that incorporation of data from non-financial institutions wouldn’t alter the current composition of the CRIB board.

The CRIB also expects these developments to lift Sri Lanka’s ranking on the World Bank’s Ease of Doing Business index.

Sri Lanka performed poorly in the ‘Ease of Getting Credit’ sub-index of the Ease of Doing Business index, lagging behind its regional peers such as India and Pakistan.

Sri Lanka was ranked 124 in this sub-index of the Ease of Doing Business 2019 index, scoring 40 points, well below the South Asian average of 80 points.  

In the ‘Getting Credit’ sub-index, Anthony noted that Sri Lanka could now score full eight points with the release of credit scores. Sri Lanka scored six points in the particular indicator in the Ease of Doing Business 2019 index.

According to the World Bank, the CRIB currently covers 46.5 percent of the country’s adult population, which includes 6.3 million adults and over 212,000 firms.
Anthony expects this figure to significantly increase with the augmentation of data from non-financial intuitions and MFIs.

Further, the CRIB also plans to offer more value-added products to its customers as it moves to the new system.   

“There will be more products available for our customers. For an example, we can alert the borrowers through SMS when their payment or instalment date nears, simultaneously the banks will also receive an alert,” he said.

The CRIB also plans to enhance the accessibility for the CRIB reports and scores by enabling the citizen to obtain the CRB reports and scores online.

“You only have to register initially with the CRIB or with your bank branch and then you can get the credit score and report online,” Anthony said.