Microfinance received a nice fillip recently when Muhammad Yunus was awarded the Presidential Medal of Freedom by U.S. President Barack Obama. While Yunus's rockstar status has helped put the access to finance agenda center stage, I wonder if it might obscure some of the hard work that goes on behind the scenes. Perhaps the phrase "credit bureaus" may not cause your heart to race, but in some countries this is really where the action is at.
Case in point: Egypt. Just a few years ago Egypt ranked a lowly 159 on the Doing Business indicator for Getting Credit. In practice this meant that average Egyptians had to rely on informal community credit organizations or attempt to sort through piles of paperwork in an uncertain attempt to get a loan from a bank. All that started to change in 2005 when the Central Bank of Egypt requested assistance from the World Bank Group to improve its credit reporting environment. IFC worked with the Central Bank and Egypt's public and private banks to set up iScore, Egypt's first credit bureau.
The result? Shalini Sankaranarayanan, a program officer with IFC's Access to Finance Advisory Services, informs me:
Close to three years after IFC’s initial engagement with iScore, the bureau was commercially launched in July 2008. With support from IFC and the systems vendor iScore’s data center was vastly expanded to include nine million data records, a 10 fold increase from the baseline of 0.9 million facilities initially held by the Central Bank of Egypt’s Public Credit Registry. The data pertains to almost 4 million SME and consumer borrowers. iScore currently services the credit information needs of 55 institutional subscribers, which includes 41 banks, 8 mortgage finance companies, 4 leasing companies, the Egyptian Social Fund for Development (SFD), and one retailer. All banking institutions and SFD have completed the credit data migration process to iScore. Mortgage finance companies have submitted approximately 65% of their data records, and the 4 leasing companies 35% of their data.
I doubt that the folks behind this initiative will ever get the kind of rockstar status that Yunus has attained, but they definitely deserve some recognition. And with a number of new studies that cast some doubt on earlier claims about the benefits of microlending, it seems even more important to focus our attention on efforts to bring more people within reach of formal lending mechanisms.
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