The Reserve Bank of Malawi (RBM) says the coming in of credit reference bureaus will help improve the quality of credit and reduce default rates.
Director of Bank Supervision at RBM, Eldin Mlelemba, was speaking in Zomba on Friday during a stakeholders’ workshop to raise awareness on Credit Reference Bureau Act 2010 and the Financial Services Act 2010.
Mlelemba said credit reference bureaus play a pivotal role in the economy by collecting and maintaining credit information for the mutual benefit of lenders as well as the entire credit industry which also includes consumers and the entire economy.
“Given the importance of bureaus in an economy, it follows that the development of sound legal framework in that regard is crucial. Without appropriate legal and regulatory reforms, it becomes difficult for any economy to deepen and widen its financial market to efficiently and effectively allocate the limited resources.
“A well-functioning, developed and transparent financial market increases incentives for investor participation, thereby promoting the savings and investment culture which ultimately translate into sustainable economic growth and development,” said Mlelemba.
Credit Data Managing Director, Patricia Mwase, said despite their importance to the economy, credit reference bureaus continue to face some challenges in as far as submission of information is concerned.
Mwase said some financial institutions look at credit bureaus as blacklisting agencies rather than partners in development.
She said some financial institutions select the type of information which they give to credit bureaus.
Speaking on behalf of the Bankers Association of Malawi, FDH Bank Managing Director, Eric Ouattara, said the reference bureaus are critical in helping banks and other financial institutions understand their customers better.