Establishing a Sound Credit Reporting System: Perspective from Doing Business

Author: Nan Jiang, Catrice Christ, Yasmin Zand
Publication: SmartLessons 2014

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This SmartLesson paper focuses on the Doing Business Getting Credit – Credit Information index, which measures rules and practices affecting the coverage, scope, and accessibility of credit information available through a credit bureau or registry. Thirty-five of the 189 economies measured by Doing Business do not have an entity that manages database on the creditworthiness of borrowers in the financial system (individuals or firms) and facilitates the exchange of credit information among creditors. Recognizing this gap, we offer some lessons learned and good practices observed worldwide in establishing well-functioning credit reporting systems. The lessons are: establishing a sound legal and regulatory framework, setting up a credit reporting agency, considering nonfinancial institutions as data providers, reporting the good as well as the bad, distributing historical data within an optimal time frame, and if beneficial, enabling cross-border credit reporting.