Business Removing

GETTING CREDIT 43
TABLE 6.1
Coverage of credit registries: Borrowers covered per 1,000 adult population
Private bureaus
Public registries
Top 10 Bottom 10 Top 10 Bottom 10
Canada 1,000 Portugal 79 Portugal 637 Mali 1
Ireland 1,000 Costa Rica 78 Belgium 533 Rwanda 1
Korea, Rep. 1,000 Denmark 71 Spain 394 Central African Republic 1
Norway 1,000 Spain 65 Malaysia 339 Saudi Arabia 1
United Kingdom 1,000 Philippines 34 Taiwan, China 334 Congo, Rep. 1
United States 1,000 Hungary 33 Chile 290 Serbia and Montenegro 1
Sweden 980 Israel 15 Venezuela 286 Cameroon 1
New Zealand 978 Pakistan 3 Argentina 201 Chad 0.4
Australia 954 Ghana 1 El Salvador 198 Nigeria 0.2
Germany 856 Kenya 1 Peru 143 Guinea 0.2
Source: Doing Business database.
than 50%, and several new products for lenders were
launched. In Hong Kong (China) the number of borrowers
covered by the bureau more than doubled, while
in Belgium it increased fivefold.
• Including more loans. Saudi Arabia’s public registry
cut the minimum loan size for collecting data from 5
million riyals to 500,000, almost doubling the number of
borrowers recorded. The Tunisian registry scrapped its
minimum loan cutoff altogether, increasing the coverage
of borrowers by more than 15 times.
• Introducing new products for lenders. These range
from credit scoring in Austria, Peru, Singapore and
Turkey to fraud detection in Ireland and Spain. Singapore
added data on borrower credit limits, the number
of days loans are overdue and commercial information
from public registries. Brazil expanded the scope of information
from 10 types to 30, including data on the
type of loan and how borrowers use credit.
• Improving data quality. The Bangladesh public registry
raised the penalty for banks that withhold data
from 2,000 takas to 500,000 and the penalty for disclosing
credit information to unauthorized parties from
2,000 takas to 100,000. As a result, the share of banks
submitting data on time jumped from 25% to 95%. In
Panama the bureau created a customer service office for
disputes on data accuracy. In Mozambique quality shot
up after new regulations allowed the registry to fine
banks for providing incomplete information. More than
a dozen countries are improving data protection laws,
which include incentives and safeguards for quality.
Overall, public registries reformed more than private
bureaus in 2003. But private bureaus remain better
structured to serve lenders. Public registries usually perform
a dual role of serving creditors and supporting the
banking supervisor in monitoring risk in the financial
system. For example only 14% of public registries report
offering such services as credit scoring, borrower monitoring
or debt collection to clients—compared with 90%
of private bureaus.
Legal rights for borrowers and lenders
Having access to past credit history is not enough. In
most countries, only the largest and best connected
businesses can get unsecured loans. The rest have to
pledge assets as collateral. In many countries, collateral
laws make this no easy task.
Lending is easier when debtors are entitled to pledge
any type of asset. But only 40 countries enable the debtor
to offer a changing pool of assets (such as inventory or
receivables), future assets (such as crops) and the entire
business as collateral. A borrower in the United States
can charge all assets of the business, tangible and intangible,
present and future, to obtain a loan that may fluctuate
in value. Doing so is impossible for a business in
Paraguay. By law the agreement must identify and describe
each asset and the debt specifically—and how to
know the future?
In Angola, Brazil, China and Mali inventory can be
used as collateral, but the list has to be updated with
every change. How would a grocery store get credit if it
has to make adjustments to the collateral list every time
a new stock arrives? And imagine a bank taking security
from an accounting firm in Algeria or Peru. Pledging its