July 2015 NewsDay monthly financial sector feature

Page 1

NewsDay Friday July 24 2015 19

MONTHLY FINANCIAL SECTOR BULLETIN “credit protection”

It’s all about partnerships W

Reserve Bank of Zimbabwe

ELCOME to the Credit Protection Supplement, the first in a series of thematically-driven and informative monthly publications brought to you courtesy of the smart partnership between NewsDay, a publication of Alpha Media Holdings (AMH) and the Monthly Financial Sector Bulletin (MFSB). The MFSB is an independent provider of proprietary data, business intelligence and analytical content supporting decisionmaking in the financial and related markets. The MFSB’s aim is to enhance the decisionmaking processes of its

targeted audiences by aggregating and distributing relevant content for their convenience, an idea which NewsDay shares. Through this partnership, NewsDay will fulfil its commercial ends while providing meaningful financial sector information. The idea is to produce supplements that meet advertisers’ genuine brand building needs while also catering for the information needs of the financial sector’s diverse stakeholders. Content for the monthly supplements will include (but not be limited to) advertising material on financial (banking, insurance and microfinance) products, analytical pieces, historical industry data otherwise scattered in different sources, interviews with, as well as guest articles written by industry professionals where necessary. It’s not just about making money off advertisements; it’s also about taking responsibility for improving financial literacy in the country’s markets. We intend

for the supplements to be sources of reference now and in future, in addition to being launch pads for financial sector brands’ valuable products. The distribution model for the supplements recognises the ongoing shift in the consumption of media products by increasingly tech-savvy and well-clued audiences — that is why in addition to being available as pullout supplements in the print edition of NewsDay, the supplements will be downloadable on NewsDay’s website and also be distributed to proprietary mailing lists of the MFSB. This means the supplements can be easily shared which no doubt increases their reach locally and internationally. We emphasise on partnerships because the credit protection industry itself is dependent on an elaborate network of partnerships in which financial sector players (credit providers) will feed credit information into the custodianship of the Reserve Bank of Zim-

babwe’s National Credit Registry, which will then sell the information to Credit Bureaus accredited to the Reserve Bank of Zimbabwe for further processing and synthesis with information from other sources in order to service the evolving information needs of credit grantors — creating a virtuous cycle of credit risk management. Lastly, the partnership between NewsDay and SoundGarden Publishing — the publishers of the MFSB — which brings you this supplement is also important in that it demonstrates the scaling up of a relationship between a long-standing columnist and a newspaper title into a mutually beneficial and empowering business partnership. Omen N Muza, the editor of the MFSB who is working with NewsDay as a technical resource person for this project, has been contributing the weekly Financial Sector Spotlight Column to NewsDay since the paper’s inception in mid-2010.

In their own words Stakeholders view on importance of credit reference system THE Monthly Financial Sector Bulletin (MFSB) has compiled these quotable quotes on the subject of Credit Reference Bureaus, attributable to financial analysts, regulators, industry players and economic analysts — most of them opinion leaders in their own right. Apart from revealing popular thinking on the subject dating as far back as the onset of dollarisation, these nuggets also highlight the pros and cons of Credit Reference Bureaus (CRBs). They establish the imperative for this important institutional infrastructure and its benefits. Limiting abuse of pledged assets “In the absence of a national credit bureau, as is the case with Zimbabwe, chances that individual bank loans may be secured against the same pledged assets for other borrowings from other sectors such as retailing (for example furniture and clothing shops) is very high. The situation will expose the banking sector to credit risk as the probability of default and impairment of such loans cannot be ruled out,” — Brokerage Firm MMC Capital, March 2011 “We recognise that the absence of a credit bureau has created information asymmetry which is being exploited by borrowers who commit against the same cash flows from different banks. This is resulting in the disounted cash flows of the said borrowers not being able to service debts. We estimate that most firms and individuals in the market could be over borrowed and this may be contributing to the current state of acute debt overhang and cases of unsustainable levels of default in the banking sector.” — The then BAZ President George Guvamatanga, June 2012

Establishing borrowers’ true creditworthiness “What the economy is in need of is a centralised credit bureau system which would help lenders establish the true creditworthiness of potential borrowers. This will ensure that individuals only borrow to levels their salaries can accommodate. Again, it will remove the existing loophole, whereby a single payslip is capable of securing multiple loans. A centralised credit bureau would also single out individuals with a poor credit repayment history” — Kumbirai Makwembere, March 2012. “One of the main challenges in the early stages of a business is access to credit, as many new and prospective business owners simply do not have sufficient credit record to verify their creditworthiness. Government is therefore engaging financial institutions with a view to establish a Credit Reference Bureau, whose objective is to build a data bank of creditworthiness of individuals and firms.” — former Finance Minister Tendai Biti presenting the 2013 National Budget, November 2012 “Absence of the CRB results in information asymmetry in the financial services sector as it is difficult to evaluate creditworthiness of borrowers.” — DPC Chief Executive Officer John Chikura at the Chief Financial Officer Winter School in Nyanga, June 2015. Strengthening Risk Management Practices “It is still my opinion that the financial sector needs to take further steps to strengthen the risk management practices through the re-establishment of a credit bureau and implementation  TO PAGE 22

G-analytiX ratings, credit scores and financial identities are providing the essential building blocks and tools required to assist the Zim Asset plan achieve its Vision and execute its Mission.  2.3 million individuals and 145 thousand SMEs that already have an FCB track record  1.5 million entities operating in the agricultural value chain,, including; small-scale farmers, agro-dealers, traders, off-takers, etc.  1.2 million individual business owners and 250 thousand SMEs that are currently outside the formal financial services system

Goodrich Analytix (Pvt) Ltd www.g-analytix.com

info@g-analytix.com

Tel.: +263 77 904 3180