of a credit bureau. The law paves the way for exchanging positive and negative historical information on firms and individuals, making it mandatory for all financial companies and voluntary for utility firms and other creditors. The law also guarantees that all borrowers can check their information once a year free of charge and sets no minimum threshold for loans included in the database. Two other economies in the region strengthened the legal rights of borrowers and lenders. The Kyrgyz Republic amended its civil code and pledge law to make secured lending more flexible by allowing general descriptions of encumbered assets and of debts and obligations. Poland amended its 1996 Act on Registered Pledges to broaden the category of persons who may hold or grant security interests. In the Middle East and North Africa 3 economies improved their credit information system. Egypt’s private credit bureau expanded the scope of information
GE T TING CREDIT
collected and now also includes retailers. Morocco introduced a private credit bureau, replacing the public registry and increasing coverage. The Republic of Yemen issued circulars removing the minimum threshold for loans included in the database and guaranteeing the right of borrowers to view their credit reports. The country’s central bank now has a credit information system—a gift from the central bank of the United Arab Emirates. In Latin America and the Caribbean 4 economies reformed. Colombia passed a new law regulating data protection, with a special section on credit bureaus and on commercial and credit information. The law guarantees the right of citizens to inspect their information and establishes mechanisms for complaints in case of errors. But the law and subsequent decisions also limit the historical information available. In Guatemala a collateral registry became operational in Guatemala City in February 2009. The registry allows secured creditors to
Table 6.3
Who has the most credit information and the most legal rights for borrowers and lenders—and who the least? Legal rights for borrowers and lenders (strength of legal rights index, 0–10) Most Hong Kong, China Kenya Kyrgyz Republic Malaysia Singapore Australia Denmark Israel New Zealand United Kingdom
Least 10 10 10 10 10 9 9 9 9 9
Belarus Burundi Eritrea Madagascar Bolivia Djibouti Syrian Arab Republic Timor-Leste Palau West Bank and Gaza
2 2 2 2 1 1 1 1 0 0
Borrowers covered by credit registries (% of adults) Most Argentina Australia Canada Iceland Ireland New Zealand Norway Sweden United Kingdom United States
Least 100 100 100 100 100 100 100 100 100 100
Liberia Nepal Algeria Yemen, Rep. Djibouti Chad Burundi Mauritania Ethiopia Madagascar
0.27 0.27 0.22 0.22 0.21 0.21 0.19 0.16 0.13 0.07
Note: The rankings on borrower coverage reflected in the table include only economies with public or private credit registries (132 in total). Another 50 economies have no credit registry and therefore no coverage. See Data notes for details. Source: Doing Business database.
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make their security rights in all types of movable assets opposable to third parties. Guatemala also passed a new law guaranteeing borrowers’ right to access their data in any public registry. Haiti passed a law allowing small and medium-size businesses to create security interests in future assets while ensuring that the creditors’ rights will extend to products and proceeds of the secured assets. Plans to create a collateral registry are under way. Honduras helped banks to better manage risks by categorizing borrowers in the public credit bureau. It also plans to adopt a new secured transactions law in the second half of 2009. Among OECD high-income economies, only Greece reformed. Its private credit bureau now distributes positive as well as negative information in credit reports. Two economies reformed in South Asia. Sri Lanka was the only reformer in credit information. The country strengthened its private credit bureau by consolidating all data from shareholder lending institutions, with no minimum threshold. Registry data have grown 10fold since 2007. Afghanistan enacted a modern secured transactions law. The law improves the mechanisms available for businesses to secure a loan. Now companies can use a broad range of movable assets as security. The law also provides for the future implementation of a collateral registry. In East Asia and the Pacific 2 economies reformed. The Philippines passed a new law establishing a credit information sharing system, and Vanuatu implemented a new collateral registry. Other reforms are on the way in the region. The Solomon Islands enacted a new secured transactions law, which will become effective once the collateral registry becomes operational in the second half of 2009. Tonga is drafting a new law on secured transactions that is expected to establish an electronic collateral registry. The Lao People’s Democratic Republic plans to implement a new collateral registry by the end of 2009.