Credit Information System brings additional support to the banking community
The Central Bank of Seychelles (CBS) is reforming and refining the existing Credit Information Systems (CIS). This will enable local banks and other financial institutions offering credit facilities to clients to further weed out the wheat from the chaff averting risks to themselves.
The CIS is a database currently being used to store information of clients who have accessed a credit facility from either commercial banks, credit unions or the Housing Finance Company (HFC). It is only specific employees from these entities as well as those from CBS who can access the clients’ information which is readily available on the database.In a recent press conference, the Central Bank made known its plans to further improve the CIS, by providing the information in a bid to assist banks which offer credit facilities to make proper analysis when determining whether a client is a bad debtor or not. This could well hinder clients’ efforts to secure a bank loan.Debtors who religiously pay off their loans or other credit facility at a bank, will not have much to worry about as their credit rating should not be affected.
At face value, the initiative is quite logical, as the banks should have means of recovering monies they lend their clients. However, on the flip side this is just another tool to protect one of the safest businesses around. It has been a while since the Seychellois have had to depend on taking out loans to make big purchases -and in some instances even for smaller ones too. For instance, if a refrigerator is to break down in a minimum wage household, the head of the said house would usually have to take out a soft loan from a bank in order to replace the item, as the family’s available cash flow would not necessarily be adequate enough to buy one outright.
However, if the person has guaranteed a family member who has taken out a loan in another bank, this information will appear on the CIS as a credit facility that the person has already availed of -lowering the chances of his own loan being approved.
The improvement of the CIS and the eventual introduction of a credit rating system, will ensure banks having crucial information about prospective borrowers, creating an environment whereby they gradually weed out those deemed a liability. This may in turn restrict the possibilities of certain individuals from experiencing the opportunity of starting a business, should they so wish. While the CIS has been in existence since 2012 and has offered over 150,000 credit evaluation facilities, the Central Bank representatives have pointed out that such data may also be used by banks to determine whether someone is a good creditor and should therefore be given incentives as an encouragement.
A fact that many creditors in Seychelles may attest to being rarely the case, is that interest rates tend to remain at a steady rate, without the borrower being offered a lower lending rate. In the words of those in the industry, this only happens if the lender is a very good client and then they may receive a discount of 1%.
Whether or not the added muscle the CIS will soon receive will prove beneficial for clients, will soon be seen. In the meantime, those wishing to access a credit facility such as credit cards, loans, guaranteeing another person for their respective loans from their banks or even simply paying their rent at HFC have to bear in mind that all the data is being stored, with the possibility of emerging to hinder an applications they may submit in future.
