The creation of a credit bureau is a complex legal, regulatory, financial, and infrastructural undertaking, often taking 5-7 years to develop from inception to operation.
When lenders face challenges like moral hazard, adverse selection, and weak contract enforcement, they will do their best to mitigate them.
Whether providing high-interest loans in informal markets, or billion dollar loans to multinational corporations, lenders everywhere face the same challenge - gaining enough information about borrowers to mitigate the risk of non-performing loans.
In 2012, Joyce received a $3,000 loan to start her business selling kitchen tiles in Lusaka, Zambia. This was no small feat in a country where 27.4% of small business owners recognize access to finance as a major or severe obstacle to business operations. While Joyce lacked the collateral she would have needed for a loan only a few years earlier, Zambia’s newly established credit bureau had a documented record of her overall creditworthiness. When she applied for the loan, the bank verified her reputation and provided the loan within just a few days.