LAUNCH OF MYCREDITSCORE, A CREDIT BUREAU COMPANY - Dr. Mahamudu Bawumia
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The Pat McAfee Show Live | Thursday March 28th, 2024

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LAUNCH OF MYCREDITSCORE, A CREDIT BUREAU COMPANY

Honorable Minister for Finance

Honorable Ministers present

The Governor of Bank of Ghana

Chief Executive Officer, Ghana Telecoms Chamber

Chief Executive Officer, Ghana Fintech and Payments Association (GFPA)

Chief Executive Officer, Ghana Association of Bankers

Chief Executive Officer, Ghana Microfinance Institutions Network (GHAMFIN)

Friends from the Media

Invited Guests

Distinguished Ladies and Gentlemen

  1. Nearly a year ago, at the 57th Congregation of Kwame Nkrumah University of Science and Technology in November 2023, I shared a vision for Ghana: the introduction of a robust broad-based credit scoring system for individuals.
  • Today, I am thrilled to join you for this momentous occasion, to take a step forward in building a dynamic credit economy for Ghana and for all Ghanaians.
  • It is a significant milestone in Ghana’s journey toward a financially inclusive and empowered society and it is driven by the private sector. This occasion represents yet another chapter in the nation’s ambitious journey toward financial inclusion. Decades of dedicated progress have laid the foundations that make today possible.
  • During my tenure as Deputy Governor at the Bank of Ghana, one of the problems that we sought to address was the issue of access to credit and the high risk premia which banks used in setting interest rates. A major constraint to accessing credit generally has been the existence of asymmetric information in the credit markets. Lenders generally cannot be certain about the credit worthiness of borrowers with the absence of credit information. We did not have a legal and regulatory framework for credit reporting and therefore did not have credit reference bureaus.
  • I called Mrs. Elsie Awadzi Addo, an astute lawyer with a deep knowledge of the financial sector, who we had worked with us as a consultant on a number of financial sector reforms, to help us draft a Credit Reporting Act for Ghana. She is now the secod Deputy Governor at the Bank of Ghana. She single-handedly drafted the Act with some minor inputs from the  management of the Bank. Thus the Credit Reporting Act was passed by Parliament in 2007. The purpose of the Credit Reporting Act (Act 726) is to provide a legal and regulatory framework for credit reporting in Ghana. The availability of credit information is generally accepted to be crucial for the development and maintenance of an effective financial sector. Borrowers tend to have a natural incentive not to reveal negative information about themselves.
  • The lack of a credit information system therefore increases the risks of lending, and causes financial institutions to provide less credit. A credit reporting system in Ghana would provide timely, accurate, and up – to – date information on the debt profile and repayment history of borrowers and would lead to a number of benefits, including:

(a)   The reduction of information asymmetry between borrowers and lenders.

(b)   Enabling financial institutions to make informed decisions about the allocation of credit.

(c)   Reducing default probabilities of borrowers as they seek to meet their obligations in a timely manner.

(d)   Improving access to credit facilities by small and medium-sized businesses.

(e)   Enabling the Central Bank to monitor systematic risks on an aggregate basis; and ultimately.

(f)    Promoting financial stability and efficient allocation of resources in the Ghanaian economy.

  • This Credit Reporting Act is designed to promote the orderly development of a credit reporting system for Ghana and to promote public trust in credit bureau operations. Specifically, the Act provides for the licensing of private credit bureaus (and gives the Bank of Ghana the authority to set up a public credit bureau), regulates the activities of credit bureaus, establishes guiding principles for the conduct of the credit reporting system, and provides for credit data submission, data management and protection, and dissemination. It seeks to strike a balance between the rights of borrowers on the one hand, and the need to share credit information effectively, on the other.

The Bank of Ghana is the regulatory authority for the Credit Reporting Act and the first credit reference bureau in Ghana was licensed in 2008. Others were subsequently licenced.

  • The Credit bureaus however faced significant challenges in the provision of individualized credit scoring:
  • The absence of a unique identity database for Ghanaians
  • The absence of a functional property address system
  • The bulk majority of Ghanaians were unbanked. 
  • Various databases that contained information on individuals were not integrated
  • After the NPP government left office after the 2008 elections, very little progress was made to resolve these issues and so broad-based individualized credit scoring did not evolve. When we came back into office in 2017, I was keenly aware of what we needed to do to get broad-based individualized credit scoring to take off  in Ghana. This is partly why introduced the:
  • Ghanacard
  • Digital Address system
  • Mobile money interoperability to address financial inclusion
  • the integration of various databases across government under the Citizens App platform.
  1. A key part of my broader vision is to create an interconnected and efficient digital government to move away from the disjointed and delayed public service delivery that has long plagued the government sector. In our quest to achieve a more efficient digital economy, key components such as: 
  2. Data interoperability, which is a single instance of data across all government agencies. 
  3. The use of cybersecurity and blockchain to create a robust system that protects citizens’ and government data as well as ensure secure transactions for government interactions. 
  4. A centralized AI database for improved government operations. 
  5. Single Sign-On Authentication where citizens only need one login for all government services. 
  1. Through the CitizenApp’s data interoperability system (CADIS) which we learnt from Estonia, we are creating a digital framework that links all government agencies, allowing data to flow seamlessly between them. This interoperability system is crucial for improving the speed and quality of government services. The system will reduce bureaucracy and streamline data sharing across agencies, as well as eliminate the need for repeated paperwork. Ghana’s CADIS is the equivalent of Estonia’s X-ROAD data interoperability system. 
  1. Interestingly, when I was pushing for the implementation of these projects many people said I had abandoned economics to pursue digitalization! They did not understand that I was using digitalization to solve economic problems!!!

Ladies and Gentlemen,

  1. The launch of the Ghana Interbank Payment and Settlement System (GHIPSS) in 2008 marked another leap toward efficient and secure financial transactions. Since 2009, mobile money has significantly broadened financial access, with over 59.7% of Ghanaians aged 15 and older now holding mobile money accounts. With the expansion of internet coverage from 2010, the nationwide rollout of digital addresses, and mobile interoperability from 2017 onward, the Ghanaian financial landscape has continued to evolve rapidly. Indeed, thanks to our implementation of Mobile Money Interoperability between banks and mobile companies, Ghana is now the only country in Africa that I know of that is ranked as having 100% access to financial inclusion. I remember that when I made the statement in 2017 that with the implementation of mobile money interoperability every Ghanaian will be able to have a bank account, many did not understand it. They even made jokes out of it. They did not think it was possible. But today we have made it possible! A momo account has effectively become a bank account thanks to interoperability and anyone who wants one can get one.   
  1. Since 2020, the accelerated digitalization of government services has transformed how citizens securely and efficiently interact with public institutions. Coupled with the widespread issuance of the Ghana Card, the integration of national databases, and the remarkable expansion of financial inclusion driven by mobile money interoperability, Ghana is now fully prepared to implement a comprehensive Credit Scoring System. This system will enhance access to credit and strengthen trust in our financial ecosystem, paving the way for a thriving credit economy.
  1. Ladies and Gentlemen, the launch of MyCreditScore introduces a critical tool that will transform the Ghanaian’s access to credit and financing. This initiative comes at a crucial time for Ghana’s financial sector. Recent data from CEIC Data reports that as of August 2024, Ghana’s non-performing loan (NPL) rate stands at a troubling 24.3%, with an unprecedented peak of 26.7% earlier this year. Such high NPL levels reflect challenges within our financial ecosystem, where the lack of a standardized, transparent credit scoring system has contributed to elevated risks for lenders and limited financial inclusion for borrowers.
  1. The introduction of MyCreditScore represents a pivotal step toward addressing these challenges, aligning Ghana’s credit ecosystem with international standards and promoting a culture of responsible borrowing. Notably, results from the MyCreditScore pilot demonstrate a stark improvement, achieving an NPL ratio of just 1.4%—a remarkable contrast to the 20.7% average reported in 2023 by the Bank of Ghana.
  1. By enabling a fairer and more consistent evaluation of creditworthiness, MyCreditScore is expected to reduce defaults significantly, strengthen confidence among financial institutions, and expand access to credit for individuals and businesses alike. The initiative reflects a broader commitment to sustainable economic growth, where financial stability and trust in credit practices play foundational roles.
  1. With the implementation of systems like MyCreditScore, Ghana is poised to transition into a financial ecosystem that not only facilitates responsible borrowing and lending practices but also drives economic resilience and inclusive growth for all stakeholders.
  1. This system is designed to reward financial responsibility, offering individuals the opportunity to demonstrate their creditworthiness transparently and confidently. For the first time, Ghanaians will have access to a credit score that can open doors to improved financing options, helping them to realize their goals and contribute to economic growth.
  • A credit score is much like a financial report card. It quantifies your payment history, debt levels, and credit behaviour into a single number, making it easier for banks and other lenders to assess your financial reliability.
  • Ladies and Gentlemen, to truly understand the potential impact of MyCreditScore, imagine these:
  • For many Ghanaians, owning a car represents freedom, flexibility, and improved job opportunities. Kwesi, a recent graduate, dreams of purchasing a car through a hire purchase scheme. In the past, he would have struggled to demonstrate his ability to repay without a clear credit history. However, with MyCreditScore, Kwesi can show that he has managed smaller loans responsibly, allowing him to enter a hire purchase agreement with confidence. This score could mean lower interest rates or favourable payment plans, making car ownership a realistic and affordable goal. For Ghanaians like Kwesi, access to credit opens the door to mobility, career growth, and independence.
  • Imagine a young couple, Ama and Kofi, who have been saving diligently to buy their first home. With MyCreditScore, they now have a verified track record of financial responsibility, helping them access a mortgage at favourable terms. A strong credit score allows them to negotiate for a larger loan amount, potentially lowering their interest rate and reducing upfront requirements. This not only brings home ownership within reach for Ama and Kofi but also empowers many other families to invest in their future. MyCreditScore, in this way, builds a pathway to long-term financial security and wealth creation for Ghanaians.
  • Entrepreneurship is at the heart of Ghana’s economy, and many young entrepreneurs face challenges accessing the capital needed to launch their businesses. For instance, Selorm has a promising business idea, but without collateral, his financing options have been limited and costly. Through MyCreditScore, Selorm can show a history of responsible financial behaviour, allowing him to secure a loan on favourable terms. This access to affordable credit enables him to launch his business, creating jobs, and contributing to the local economy. With the support of MyCreditScore, more Ghanaian entrepreneurs can unlock their potential, leading to economic growth and innovation across the country.
  • Consider Yaa, a mother of three who works hard to support her family. One day, she faces an unexpected medical expense and needs access to quick credit. In the past, without a formal credit history, Yaa would have been forced to turn to informal lenders charging high interest rates. With MyCreditScore, she can quickly and transparently access a small loan from a bank or micro-lender, covering the emergency without incurring unmanageable debt. This system not only provides immediate assistance for emergencies but also ensures that Yaa can rebuild her credit score by repaying on time, giving her greater financial stability.
  • These scenarios reflect the broad and transformative impact of an effective credit economy. Beyond individuals, MyCreditScore will contribute to a more resilient and inclusive financial system. With a lower rate of non-performing loans, banks and financial institutions will gain confidence in lending, supporting a cycle of growth and trust. Furthermore, as Ghanaians embrace financial responsibility, we move toward a society where fair access to credit becomes the norm, empowering individuals, families, and businesses alike.
  • This system is a pathway to opportunity, helping unlock the potential of every Ghanaian. By creating a credit system that is open, reliable, and fair, we’re setting the stage for a future where financial empowerment is within everyone’s reach.
  • With this launch, we are not going to be like the United States, Canada or the UK overnight. But we are starting a process that, with time,  our system will be just like theirs and probably better than theirs. It is possible!

This is a great day for Ghana and I want to thank the Bank of Ghana and MyCredit score and all the other stakeholders. It is important that all potential lenders and borrowers and retailers be educated and sensitized on the workings of a credit scoring system.

  • My thanks to the Governor of the Bank of Ghana, Management and Staff of the Bank, for making this possible. The Governor has been one of the most transformational Governors we have had at the Bank but he and his deputies operate very quietly like a Governors are supposed to. Big Respect to you, Dr. Maxwell Opoku Afari and Elsie Awadzi Addo. This Credit Scoring initiative that you have licensed and which we are launching today is huge and Ghana will forever be grateful to you. 
  • I am also excited that this initiative is a Ghanaian homegrown private sector initiative . We will continue to support our private sector to champion such initiatives in the digital and other sectors.
  • Let’s move forward with optimism and purpose, knowing that together we’re building a Ghana where financial inclusion is real, dreams are within reach, and every Ghanaian has the chance to achieve financial security and prosperity. It is possible!!!
  • I thank you all for your attention. God bless you and our homeland Ghana .