Credit-scoring technology in Africa

29 Mar 2012

Behavioural economists like to say that human beings are poor at assessing risk; underestimate likely dangers and overestimate unlikely ones. Assessing risk is mathematical and using the right data helps make better decisions. But for humans, risk and emotion are inseparable. Credit-rating agencies use only data when assessing risk within financial marketplaces and they carry much influence over financial instruments by deciding how to grade debt,

PIC Solutions has been providing consumer credit-risk solutions to the African market since 1999 and has seen the sophistication of this market grow significantly in recent years.

Africa's emerging market requirements differ to that of European counterparts, the discipline of credit-scoring (a sophisticated technology in itself) is being increasingly implemented across the continent, with many companies now relying on technology for their credit risk analysis needs.

Since its inception, PIC Solutions has introduced over 200 scorecards into the South African market and nearly 100 scorecards into the rest of Africa. South African markets remains robust as customers' requirements continue to evolve, the country is fortunate to be served by a number of well-established credit bureaus, whose role is becoming increasingly important in Africa.

According to reports Africa is represented by 22 credit bureaus across the following countries: Egypt, Ghana, Kenya, Mozambique, Namibia, Nigeria, Rwanda, South Africa, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.

Partnerships

XDS Credit Bureau from Nigeria has partnered with PIC on numerous initiatives and has again joined forces to run a series of workshops in Ghana, reportedly the fastest growing economy in the world in 2011. The aim was to introduce clients to the potential value of bureau data and credit scores. The workshops were attended by a number of financial institutions including Stanbic, Barclays, Ecobank, Unibank, Energy Bank and Fidelity Bank.

The International Finance Corporation continues to support the establishment and development of private credit bureaus across Africa in countries such as Mozambique and Tanzania. Some African countries are moving away from the more traditional payroll-lending models, which will increase demand for effective data-driven credit decisions.

PIC Solutions' most recent scorecard delivery into the African market was with Standard Bank Africa, which included a number of application and behavioural scorecards for Nigeria, Ghana, Uganda, Kenya, Namibia, Zambia, Tanzania, Swaziland and Lesotho.

Standard Bank Africa's head of scoring, Ray Anderson felt that the first generation of "expert" application cards built by PIC Solutions 18 to 24 months ago 'had performed above expectations' and he was pleased with the flexibility and expertise that PIC Solutions had added to the recent project, especially when challenged with sparse data.

"Seeing the growth in the African market is really encouraging. Working with PIC Solutions enables XDS to share its knowledge and expand its current presence in the market," says XDS chief financial officer Michael Henderson. "The workshops show that the desire for more information and a strong credit industry is there and needs to be met."