x Abu Dhabi, UAESunday 21 January 2018

Zaid Kamhawi, chief business officer, Emcredit

A Dubai law requires local and international lenders to share information on their customers within the UAE with the credit bureau Emcredit.

Zaid Kamhawi says the new system will expand credit to low-income groups.
Zaid Kamhawi says the new system will expand credit to low-income groups.

Why is a credit bureau needed? Economists point to the existence of a credit bureau as an important tool in the development of an economy. Evidence from The World Bank shows access to credit is easier in countries with a credit bureau in place. By offering banks more insight into an individual's financial history, it diminishes the chance of a bank either extending a loan to a customer who may default or rejecting credit to someone who may have a clean financial record. One of the purposes of a credit bureau is to expand credit in under-serviced markets like the low-income group and SME sector.

What information will be available to banks from the database? Emcredit will provide an itemised report on a consumer giving details of each credit facility a borrower has taken out over the last two years, including credit cards, personal loans, vehicle loans and mortgages. It will provide details of any defaults or outstanding amounts and a history of how each customer has performed on credit repayments on a monthly basis. Identification information including an individual's name, home and work address, passport details and salary will also be listed. In addition to details on retail customers, Emcredit hopes to build records of SME customers too.

When will the database be ready? Emcredit holds credit data of around 30 per cent of the country's approximately three million retail banking customers at the moment. It aims to extend that figure to 80 per cent coverage within a year. To reach this target, it will focus on gathering information from the top 10 largest foreign and local banks first.

What other information does Emcredit hold currently? Around nine million peoples' names, dates of birth, passport numbers, addresses and places of work are stored on Emcredit's database at the moment. This information is gathered from government agencies such as the police, Dubai Land Department and utility providers, which are used by banks to verify and validate consumer records when an individual applies for credit. The data includes information on people who have left the UAE. Registered as a private entity, Emcredit was set up following a Government directive in 2006.

Will there be a federal law? Federal legislation is expected to follow, which will reinforce the robustness of the existing legal infrastructure. The Federal National Council in March last year approved a federal credit information law that is yet to be passed.