CREDIT INFORMATION BUREAU

The role of Credit Information Bureau is integral to credit risk management and the promotion of a sound credit culture in financial system. The existence of well functioning credit bureau promotes prudence and professionalism among financial institutions, adoption of best business practices and making informed and responsible lending decisions in timely manners.

The Credit Information Bureau (CIB) was established in 1992. Functions and activities of CIB are being governed under Section 25(A) of Banking Companies Ordinance-1962. Ever since its inception, the CIB in Pakistan has been playing a pivotal role in gathering, organizing and disseminating critical information relating to credit-worthiness of borrowers to assist financial institutions in their lending decisions and averting the occurrence of default. Financial institutions started submitting their borrowers’ data of Rs. 0.5 million & above on quarterly basis. Subsequently the frequency of data submission was shifted from quarterly to monthly basis. In April 2003, SBP enhanced the coverage and effectiveness of CIB by introducing eCIB online facilities. CIB was the first bureau of the region introducing online facility to its member financial institutions. This development enabled financial institutions to upload their data directly into eCIB system and also generate online CIB reports.

With the growing complexities and emerging challenges on the financial landscape, the role of CIB has become even more critical. The CIB at SBP has responded positively to new challenges. From the earlier simple, manually operated data system, the CIB at SBP has evolved into a very sophisticated and hi-tech entity using state-of the-art technology to perform its crucial functions more efficiently. The strengthened capacity and improved operational efficiency has enabled the CIB to enlarge significantly the scope of reporting by doing away with the minimum limit of Rs. 500,000. The purpose is to capture the diverse categories of borrowers in view of growing exposure of banks to consumers, agriculture and SMEs.

The revamped eCIB has been operational since September-05. The eCIB has overcome the limitations, such as restricted information on borrowers, relatively low safeguards, low speed and reliability, low number of borrowers i.e. 0.2 million, etc which characterize the existing system. Existing eCIB system has been designed in line with best international credit sharing practices around the world. The eCIB database has now been capturing more than 4 million borrowers’ records of about 100 member financial institutions.

The key improvements of the new system also include to:

	Separation of Consumer and Corporate reports as well as data input formats.
	Provisions for consumer credit and default history.
	Improved efficiency in terms of speed, reliability and security of CIB data in order to reduce the processing cost/time of FIs;.
	The new CIB system has been built on latest state of the art technology which includes high capacity servers, security firewalls, broader bandwidth, point to point data encryption, web based data capturing software having ability to capture the data from gross route level etc.
	Provisions for online amendments and updations for the FIs.
	Incorporation of large number of validation rules on data capturing application to ensure integrity and accuracy of the submitted data.
	Automated support and help to the FI users.

The improved capacity and scope of the CIB is expected to deliver the following benefits:

The eCIB database has greatly expanded outreach to a large number of borrowers who until now remained untapped because of the floor of Rs 500,000/- for reporting purposes. This has important implications with regard to credit expansion to low-value borrowers of SMEs, agriculture and consumer finance sectors. The financial institutions’ access to credit profile of these borrowers will not only encourage them to grant loans more willingly to worthy borrowers but also would help assess their overall credit risk exposure. This, in turn, will serve to reduce the system’s vulnerability to financial instability.

The new look CIB, will be another milestone in SBP’s efforts to uplift the country’s financial system to the standards recognized internationally, and to promote the financial stability. It has made possible for banks to meet the credit needs of the emerging sectors on sustainable basis by applying prudent and objective analysis of borrowers’ credit profiles. This will also be a boon to those borrowers, who could not access bank lending because of lack of adequate collaterals. The strengthened CIB will also help in further boosting the supervisory capacities with greater access to more reliable and detailed information. All in all, the reinvigorated CIB is all set to spell benefits to all the stakeholders’ viz. financial institutions, borrowers and regulators to the ultimate goal of sound financial system.