Checks show that existing licensed credit bureaus already produce individual scores in Ghana – Theo Acheampong issues rejoinder to his earlier article

An economist, Dr Theo Acheampong, has said that his checks have shown that there are existing licensed credit bureaus in Ghana that produce individual scores, however imperfect they may be.

He said this after issuing a rejoinder to his earlier article which asserted, among others, that “the products and services offered by the Credit Bureaus are not individualized credit scoring”.

In his earlier article, he indicated that the Vice President Dr Mahamudu Bawumia was right in the sense that individualized credit scoring does not exist in Ghana.

Dr Theo Acheampong stated that although he is not an IT expert, leveraging the Ghana Card to become the anchor of the credit system and, thereby, meet the ultimate goal of a personalized credit score is a sensible idea that must be supported by all.

Dr. Bawumia announced at the 57th congregation of the Kwame Nkrumah University of Science and Technology that Ghana will introduce a credit scoring system next year to allow Ghanaians access to personal loans and also help financial institutions control the allocation of risks and costs with their clients.

It was his view that the credit system would ensure discipline in the payment of loans.

“Ghana early next year will be introducing a credit scoring system for individuals. Every individual will have a credit score. Right now, our credit scoring system does not exist.

“So, everybody is seen as risky and the interest rates are high. But we are going to go into individualized credit scores. So, if you don’t pay your loan, you will have no credit score and you will have a problem when you go for a loan. But if you are diligent in paying your loans you get your high credit score and you are likely to get lower interest rates. This will bring more discipline,” he said.

Dr Bawumia’s policy proposal received a flak from some analysts including a professor at the University of Ghana, Kobby Mensah who cast doubt on the ability to roll out such a policy.

In a post shared on X on November 28, 2023, Prof Mensah asked why the Ghana Card is not being used to acquire vehicles because there are garages in Ghana already.

“Are we not in Ghana? Are there no garages in Ghana? If the answers to these questions are yes, then the case is simple.

“Take your Ghana card to CFAO to pick up a Mercedes and let’s prove the theory,” he wrote

But in a write-up on his X platform, Dr Theo Acheampong said that “We must commend such policies. The policy debates have already started ahead of the 2024 elections, and some of us are here to interrogate them in detail and offer alternative pathways. It is our civic duty!”

In a rejoinder to his own article, Dr Theo Acheampong said “In fact, the existing licensed credit bureaus—namely XDS Data Ghana Limited and Dun and Bradstreet Credit Bureau Limited— do produce individual scores, however imperfect they may be.

“In that regard, I was wrong. Relatedly, Dr Bawumia could not have been fully correct in his assertion.”

REJOINDER TO “DR BAWUMIAH IS RIGHT: A PERSONAL CREDIT-SCORING SYSTEM DOES NOT EXIST, AND IT IS A MUST TO DEEPEN FINANCIAL ACCESS”

There’s been an interesting debate the past week on social media on the proposal by Ghana’s VP Bawumia “that Ghana early next year [2024] will be…

— Theo Acheampong, PhD (@mytheoz) December 3, 2023

Below is his rejoinder…

REJOINDER TO “DR BAWUMIAH IS RIGHT: A PERSONAL CREDIT-SCORING SYSTEM DOES NOT EXIST, AND IT IS A MUST TO DEEPEN FINANCIAL ACCESS”

There’s been an interesting debate the past week on social media on the proposal by Ghana’s VP Bawumia “that Ghana early next year [2024] will be introducing a credit scoring system for individuals…right now, our credit scoring system does not exist”.

I’ve had the chance to listen more carefully and fully to what the VP said and consult more with some stakeholders in Ghana’s finance space.

Based on this and the commitment I made on Bright Simon’s [@BBSimons] wall, I am happy to issue this rejoinder to my earlier note.

My article asserted, among others, that “the products and services offered by the Credit Bureaus are not INDIVIDUALISED CREDIT SCORING”.

In fact, the existing licensed credit bureaus—namely XDS Data Ghana Limited and Dun and Bradstreet Credit Bureau Limited— do produce individual scores, however imperfect they may be.

In that regard, I was wrong. Relatedly, Dr Bawumiah could not have been fully correct in his assertion.

Way Forward

——-

Subject to technical feasibility, I still think that it should be possible to incorporate elements/data points from the Ghana Card to (1) improve on the existing individual credit scoring with a view of offering a more nuanced risk profile and, therefore, lower cost of credit; and (2) expand the scoring to other segments of the population, especially those outside the formal economy but who have the Ghana Card as their primary identification. Why? For example, one of the existing credit bureaus [Dun and Bradstreet] pings and uses the “photograph of the customer obtained from Electoral Commission—see exhibit attached”.

Thus, it should be possible to ping the National ID Card database to establish additional data parameters about all individuals. In other words, the National Identification Authority (NIA) will add to the existing twenty-two (22) institutions and companies that are designated as data providers [and authorised users] of the credit reporting system. In this case, NIA will become more of a data provider. The National Identification Authority (NIA) indicates that over 17 million Ghanaians have been registered for the Ghana Card as of February 2023.

That provides an opportunity for 17 million unique searches [and potentially more]. The 2022 Bank of Ghana Credit Report [p.11] indicates that 85% of searches made by credit report recipients on credit bureau databases resulted in a hit of some “only demographic or both demographic and financial data”. This was an improvement over the 2021 position of 54% due to high “hits” recorded from mobile money loan borrowers. In other words, without the MoMo data. it would probably have averaged the three-year hit rate of 61% from 2021 to 2018. This tells me that the system, and by extension, the scores, are NOT PERFECT. In that regard, we must find ways to incorporate additional data points to improve it, and the Ghana card could help. A 2015 report by the SEEP Network noted that “there is no single unique identifier within the licensed credit bureau market” and that more use of the national ID system could help.

Secondly, I’d advise the government to partner with XDS Data Ghana and Dun and Bradstreet to introduce/rollout an APP, WEB PORTAL and USSD, that can allow a citizen of Ghana with their name and unique National ID Card Number to quickly check their INDIVIDUAL credit SCORE and basic report for FREE. They can then pay some agreed amount through the app for a full credit report if they wish. The revenue-sharing arrangement can be sorted out between the government and the credit agencies.

Thanks, everyone, for engaging in this very topical policy debate.

Have a good week ahead! 🙏🙏