Where credit is due: Ease of doing business expected to improve with the launch of the country’s first credit bureau

Banks and small businesses welcomed the launch of Jordan’s first credit bureau in 2015, with the new privately owned agency set to improve the kingdom’s lending growth, investment climate and support business financing. Although its establishment was delayed for years as politicians decided how best to roll out the new agency, the bureau finally came into operation in late 2015 and is slated to underpin government efforts to bolster lending to small and medium-sized enterprises (SMEs). While there is still room for improvement, with some stakeholders arguing that a lower threshold for reportable debts is needed if the bureau is to be truly effective, the addition of a credit bureau could be a turning point for lending growth in the kingdom.

Knowledge Is Power

Developed as part of ongoing efforts to transform Jordan’s business environment, attract new investment and support entrepreneurial ventures, Jordan’s credit bureau was originally conceived in 2008. The government passed a law endorsing the bureau in 2010, although various stakeholder concerns regarding the exact form and function of the new bureau delayed its launch until recently.

The credit bureau will enable banks to capture a larger portion of SME lending, and stakeholders argue the conditions for such a body are ideal. In August 2015, for example, Italian credit information services provider CRIF, which owns the bureau, reported that Jordan’s microfinance market accounts for 185,000 loans per year and is recording annual growth of 20%. With GDP growth forecast to reach 4.5% in 2017, and inflation to be in the mid-single-digit range before falling in the coming years, the establishment of a credit bureau is seen as critical for long-term financial services growth.

CRIF also noted that, compared to developed credit markets where consumer credit applications generally account for about one-third of the population on an annual basis, Jordan’s ratio could rise to between 40% and 50% in the coming years given the number of eligible credit providers, including banks, among others.

Official Launch

In December 2015 Abdullah Ensour, then-prime minister, announced that the credit bureau had officially launched and would provide information for creditors about the track records of applicants for credit facilities – particularly the SME segment. Ahmad Amoudi, CRIF’s general manager, told OBG that the platform will gather both positive and negative credit information on individuals and businesses, including a broad spectrum of lenders, with plans to diversify “quality” sources of information to enrich the content of reports, as well as to develop a system for scoring credit. However, Muntaser Dawwas, CEO of InvestBank, told OBG, “The credit bureau works on historical data, so it will take time for the benefits to really start being seen.”

In a first for the Arab region, Jordan’s credit bureau is overseen by the Central Bank of Jordan (CBJ), but privately held by CRIF, which has operations across 50 countries, 3100 financial institutions and 25,000 clients. The bureau is the only credit bureau in the Arab World completely owned by the private sector. However, the government is considering opening the credit bureau market up to new competition in the future.

New Partners

Some stakeholders have argued that since the CBJ will not report any personal debts below JD20,000 ($28,100), it will be more difficult for banks to accurately gauge risk for many borrowers. However, reaction to the new bureau has been largely positive, as evidenced by the growing number of financial institutions signing on to participate in the project.

In February 2016 CRIF announced it had signed credit information service deals with six banks in the kingdom, including Bank al Etihad, Capital Bank, Jordan Kuwait Bank, the Housing Bank, Standard Chartered and Arab Jordan Investment Bank. CRIF also said it will begin providing comprehensive credit reports through a digital platform by the end of 2016. The agency is working with 19 banks, two telecommunications providers and one insurance company, indicating high unmet demand.