The practice is in violation of Section 26 of the Credit Reporting Act, 2007 (ACT 726), which mandates all financial institutions to obtain credit reports on all prospective borrowers before granting or refusing a credit facility application.

According to the Credit Referencing Activity Annual Report, 2017, authored by the Financial Stability Department of the Bank of Ghana (BoG), the body presented the performance, key developments and trends in credit referencing system in the country said trend indicated a low usage of credit reports.

It said, for instance, that some rural and community banks (RCBs) had not conducted credit checks on some borrowers with the notion that they were their regular customers, while majority of microfinance institutions (MFIs) were yet to register with credit bureaus to obtain credit reports.

According to the report, data submission improved significantly last year, with individual loan records submitted to credit bureaus increasing by 17 per cent on an average monthly basis and data submitted on commercial loan customers also increased by 42 per cent monthly.

Also, a total of 1,418 complaints and disputes were received from customers in 2017, representing an increase of 11 per cent compared to 1,280 complaints in 2016.
Some of the complaints involved persons who had credit facilities registered on their credit reports when they had not received any credit facility from the respective institutions.

The report attributed the increasing trend to the increased awareness of credit referencing among the public and said that all complaints received in the year under review were resolved.

The three credit bureaus are XDS Data Ghana, Hudson Price Data Solutions Limited and Dun & Bradstreet Credit Bureau Limited.

Some of the existing products and services provided by these bureaus are Consumer Basic Credit Report (This contains personal information, credit account summary, detailed credit facility status, and monthly payment behaviour); Business Check (this engine allows subscribers to verify the validity of company name, registration number, and Tax Identification Number (TIN) of registered entities); and Industry Reports (these include variety of products to enhance the Know Your Customer (KYC) procedures of financial institutions with respect to bank’s business customers). 

Some developments

The report stated that inefficient banking software and lack of expertise was a challenge in the year under review.

“To provide good quality data, financial institutions need to have robust banking software that will facilitate data extraction and management. Our observation, however, is that several institutions, especially MFIs and Non-Banking Financial Institutions (NBFIs) do not have the requisite tools for extracting data,” it said. 
Consequently, the manually populated data submitted to credit bureaus are susceptible to errors and partly account for the poor quality and non-submission of data.

The report recommended that surveillance on financial institutions and credit bureaus should be strengthened to ensure that institutions which violated the Credit Reporting Act and BoG directives were sanctioned to serve as deterrent to others.

“All identified potential data sources should be engaged in order to broaden the sources from which credit bureaus can obtain data. This would improve the quality of reports generated by the credit bureaus,” it said.

It added that the Bank should engage in public education and awareness programme with the other stakeholders to ensure that consumers and financial institutions were fully aware of their rights and responsibilities under the Credit Reporting Act.