Creating

34 DOING BUSINESS IN 2006
Who is reforming?
In 2004, 25 countries improved the way credit information
is shared. Eight new private credit bureaus
kicked off operations—in India, Indonesia, the Kyrgyz
Republic, Lithuania, Nigeria, Romania, Saudi Arabia and
Slovakia. New public registries started up in Armenia
and Azerbaijan. Several of the new registries are still
getting off the ground and have only sparse coverage of
borrowers (table 6.2).
Other reforms to sharing credit information took 5
directions:
• Passing new regulations. In 2004 the most popular
reform was to eliminate obstacles to sharing credit
information through a special law or regulation—as
in India, Israel, Kazakhstan, Nicaragua and Russia—
or through amendment of the banking act—as in
Azerbaijan, Kenya, FYR Macedonia and Mauritius.
The revised New Zealand code launched a consumer
complaints procedure and strict controls on accuracy
of data. The Italian code stressed reliability and timeliness
of credit reports, but cut the time that historical
data can be stored. Greece and Uruguay introduced
new data protection laws designed to safeguard borrowers’
privacy and the integrity of data.
• Expanding the scope of information. In Bangladesh
the public registry incorporated consumer credit card
data into its database. The Egyptian registry set up a
list of borrowers defaulting on small credit card and
car loans. Honduras now requires all banks to report
both positive and negative information. 2 In Lebanon,
FYR Macedonia, Romania and Rwanda more comprehensive
credit reports are now distributed.
• Including more loans. Egypt’s public registry cut
the minimum loan size above which it collects data
from $6,900 to $5,200. Lebanon’s registry lowered its
cutoff from $6,600 to $6,000, adding 10,000 more
borrowers to the registry. And the public registries in
Bulgaria, Iran, Romania and Vietnam scrapped their
minimum loan cutoff altogether. In Vietnam coverage
of borrowers increased by a third. In Bulgaria it
expanded ninefold—although these developments
stalled the initiative for a private bureau.
TABLE 6.2
Who has the most credit information—and who the least?
Borrowers covered as % of adults
Most
Least
Australia 100 Kyrgyz Republic 0.20
Canada 100 Mauritania 0.19
Iceland 100 Chad 0.19
Ireland 100 Nepal 0.14
Norway 100 Kenya 0.14
Sweden 100 Rwanda 0.12
United States 100 Indonesia 0.09
New Zealand 96 Serbia and Montenegro 0.08
Argentina 95 Yemen 0.08
Germany 88 Guinea 0.02
Note: The rankings refl ected in the table include only countries with public or private credit
registries (111 in total). Another 44 countries have no registry and therefore no coverage.
Source: Doing Business database.
• Providing data online. The Bulgarian public registry
launched an online system, cutting the time to retrieve
data from 3 days to just seconds. The Rwandan
central bank computerized the database in its public
registry, although data are still collected and distributed
manually.
• Enhancing data quality. In Mongolia a penalty of up
to $900 may now be imposed on banks every time
they fail to update credit histories. Nepal imposed
penalties on banks and their staff for withholding
credit information. Coverage of borrowers increased
by 13%. More than half of countries impose
penalties for distributing erroneous data. But it is
possible to go too far. When Thailand made directors
of credit bureaus personally liable for errors in
2003, the Thai bureaus closed for 5 months until
the requirement was relaxed. Countries can keep
penalties moderate and focus on improving quality
through data protection laws—for example, by allowing
borrowers the right to access their data and
to demand corrections.
Ten countries made it easier to create and enforce
collateral agreements in 2004: Bosnia and Herzegovina,
Brazil, Croatia, Finland, India, Japan, Romania, Serbia
and Montenegro, Sweden and Ukraine. Reforms in
Bosnia and Herzegovina, Serbia and Montenegro and
Ukraine covered all aspects of secured transactions law:
creation, priority, registration and enforcement of collateral.
The new pledge law in Bosnia and Herzegovina
allows general descriptions of assets, permitting a much
wider scope of assets to be used as collateral, including
inventory and accounts receivable. It streamlined en-