Pakistan's central bank becomes the first in South Asia to offer online credit information service to its stakeholders

May 05 - 18, 2003

The Governor, State Bank of Pakistan, Dr. Ishrat Husain formally inaugurated the online facility Credit Information Bureau (CIB) for banks/Development Finance Institutions (DFIs) and Non-Bank Finance Companies (NBFCs) on April 25, 2003. With the launching of this facility, Pakistan's central bank has become the first in South Asia to offer this service. The CIB online service has been developed in collaboration with Pakistan Banks Association. It is an important step towards provision of best international practices to financial institutions and State Bank's transformation into a modern and dynamic central bank.

It is mandatory for the financial institutions to seek credit report from CIB before extending any financial facility of Rs 500,000 and above to the borrowers. Through this facility financial institutions will be able to obtain reports from the central bank electronically. Besides credit reports, financial institutions will also submit monthly credit data required by the SBP, online. This facility will promote efficiency in the credit appraisal process of the financial institutions, It will also minimize the time lag in submission of data and retrieval of credit reports. It is worth noting that the SBP also took the lead in South Asia by setting up the CIB in January 1992.

The role of CIBs, in well-functioning credit market, is very important. They provide rapid access to standardized information on borrowers. Credit reporting systems have become increasingly important throughout the world. The CIBs collect data from financial institutions, process it and disseminate the consolidated data to financial institutions or other users on request. Data contained in the credit reports, issued by the CIBs, improves the ability of financial institutions to assess credit risk, loan processing cost and their credit appraisal administration and monitoring processes. A good credit history is considered as 'Reputation Collateral' that can build confidence into banker-customer relationship.

The CIBs act as repository institution through which exchange of information among the financial institutions takes place. CIBs also encourage greater competition among the financial institutions for following up the credit worthy customers. They reduce the information advantage that some financial institutions have over their existing clients, which leads to lower prices and greater access to credit.

According to the information available from the banking sources there were nearly 165,000 listed borrowers in Pakistan as on February 2003. They have obtained Rs 500,000 or above credit facility from the financial institutions. Out of this about 60,000 are active borrowers. Among the active borrowers nearly 15,000 are group borrowers and slightly more than 45,000 non-group borrowers. The largest number of 52,722 borrowers has obtained facility up to Rs 10 million. Another 4,710 borrowers have availed the facility ranging from Rs 10-50 million. There are 2,564 borrowers who have obtained over Rs 50 million facility.

The CIB online project of the central bank has been established with the active participation as well as financial support of Pakistan Banks Association. This enables the financial institutions to submit CIB data online through data capturing software and obtain online reports through CIB inquiry software. The facility offers installation of data capturing software at head office, regional and zonal offices and even at branch level. It facilitates entry of new records at branch level. The beauty of this facility is that it enables the financial institutions to compile data at all levels as well submission of consolidated data to SBP server at head office level as well as retrieval of reports through authorized persons.

Normally, implementation of such projects is difficult and time consuming. However, due to the active support of all the financial institutions the job was made much easier for State Bank of Pakistan. The SBP was the first to start CIB facility in 1992 in South Asia and it has maintained its lead by being the first to launch CIB online facility. It is worth noting that CIBs are operating in 62 countries around the globe.

Till formal launching, 62 financial institutions had joined the facility and the remaining were expected to join latest by April 30, 2003. This has opened a new chapter in the history of financial sector in Pakistan. It is expected that with the introduction of this facility not only the borrowers will benefit but financial institutions will be able to make prompt and prudent decisions. Keeping in view the sensitivity of information the best efforts have been made to incorporate security measures. Trail of each entry will be kept to avoid access by unauthorized persons and tempering of the data.