Lennox McLeod looks to establish Jamaica's first credit bureau

Friday, November 20, 2009 6:16 PM

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By Al Edwards

Friday, July 03, 2009

For the last decade there has been a consistent call for an effective credit bureau that would serve Jamaica's financial sector and assist in creating better credit terms for customers. Leading the charge has been the former head of the Jamaica Bankers' Association (JBA) and former CEO of Scotia Group, Bill Clarke.

McLeod... a credit bureau will not solve all of Jamaica's problems, but it will be a significant step in helping the country as far as transparency and access to finance is concerned

Lennox McLeod appears close to making that become a reality with his company Premier Credit, which should be operational later this year. The company was registered in Jamaica in December 2006. Premier Credit was set up to operate as a credit bureau. A credit bureau is a repository of credit information on consumers. The company will be providing 24-hour access to credit history and offering risk management solutions. It will also offer a range of consumer and commercial information solutions that handle:

. Anti-money laundering
. Fraud prevention
. Identity management

McLeod is a chartered accountant by training and runs his own chartered accountancy firm back in the UK.

"About three years ago I felt that I had done as much as I wanted to do in England and was ready to return to Jamaica. I was looking at opportunities in the financial sector and came up with two ideas, one of which was to set up an independent credit card company and the other to set up a credit bureau."

After extensive research he put together a team of qualified and experienced professionals to get the company up and running. He then had to contend with the Credit Reporting Bill, which would set the legislative framework that would enable the operation of credit bureaux in this country.

In 2007, the JBA invited McLeod's company to do a formal presentation but did express concerns that the company had not operated a credit bureau before. McLeod responded by focusing upon expertise and the team he had in place was one that undeniably could execute their mission.

"What drives a credit bureau is analytics. Analytics are made up of credit score cards. The same guys who built our score cards build score cards for the world's most renowned credit bureaux. They are a UK-based company called DecisionMetrics. They also provide score cards for the largest furniture retailer in the Caribbean.

"Premier Credit will be established, firstly in Jamaica, largely because I am Jamaican and I think it is in the national interest that the country has a fully working credit bureau. Jamaicans can expect to see clarity and transparency in terms of assessing credit, so no longer will the process of assessng credit-worthiness be subjective. We will use a standardised process to determine people's credit-worthiness.

Despite who you are, where you are from, if you are able to maintain a good credit rating you stand the same chance - even if you live in downtown Kingston - as the person who lives in uptown enclaves like Norbrook, Jacks Hill and Stony Hill. To the best of my understanding, that's not the way it is right now," said McLeod. The CEO of Premier Credit went on to add that the other benefit that consumers can expect to get from the operation of a credit bureau is lower interest rates. Why so? Because it is often said that interest rates are high in Jamaica because of the inability of financial institutions to assess credit risks.

"When our credit bureau becomes fully operational, there will be no need for that excuse anymore. I expect to see consumers benefit from reduced and cheaper interest rates. People will be able now to access credit cheaper and by doing so, it is my hope that they will be able to make better use of funds in terms of their personal interests or business.

"As far as the banks and other financial institutions are concerned, they will be able to price credit risks better. In other words, they will be able to establish fairly quickly and accurately what is the credit-worthiness of an individual or business. Those are the benefits in a nutshell that a credit bureau brings to Jamaica."

On a macro level, Jamaica is currently ranked 96th out of 180 countries in the world as far as Corruption Perception Index is concerned. A voluntary organisation called Transaparency International conducts a survey every year, with the objective of assessing the opacity and transparency of financial systems in countries across the world. A few years ago Jamaica was ranked 62nd, but for 2008 it has fallen to 96th.

"Now what is the relevance of that? It is clearly established by a group of economists known as the Kurtzman Group that there is a correlation between corruption and growth in a country. Kurtzman is a former partner of PriceWaterhouseCoopers and he has established that for every percentage point of increase in opacity in a financial system it impacts on Gross Domestic Product (GDP) by US$986. Now this study was conducted back in 2001.

"So when investors around the world are looking at countries to invest in, these are some of the tools they employ. It's all about the risks to the investment and so a high opacity rating significantly impedes the FDI of a country. Now that's not the only reason Jamaica suffers from reduced FDI. A credit bureau will not solve all of Jamaica's problems, but it will be a significant step in helping the country as far as transparency and access to finance is concerned. If you have a system whereby it is easy to access finance, then of course that drives the micro business sector, which in turn helps to drive the economy."

Bill Clarke leads the charge

McLeod acknowledges Bill Clarke's efforts in pushing for a credit bureau but notes that the banks by themselves could not see through the passing of the necessary legislation to put the bureau in place. As it stands now, there is the Credit Reporting Bill, which is yet to be enacted in Parliament.

At the moment it is with a Select Committee which is deliberating and making recommendations. In some of the world's wealthiest countries, no legislation is required to operate a credit bureau, it is the Data Protection Act which provides guidance. Credit bureaux operate both in Trinidad and Barbados, and the enactment of specific legislation has not stood as an impediment in those Caribbean countries. In fact, Barbados is ranked 24th in the Corruption Perception Index.

Mc Leod says that bankers have been receptive to the idea of a credit bureau and he has had encouraging meetings with legislators, but what he has yet to see is the will to get this done.

Golding sees the need for a credit bureau

The Prime Minister Bruce Golding in his budget speech in May of this year said: "We will be bringing to Parliament, early in this legislative session a Bill to establish a credit bureau, which will greatly assist lending institutions in granting loans. It is an important piece of legislation. People who have a record of being faithful in their financial obligations may not have the collateral but they will be able to walk into a bank with their credit-worthiness and secure a loan. "A good credit record is a better guarantee than a land title. A land title means that you can foreclose on the loan. A good credit history means that you are unlikely to foreclose on the loan."

It is McLeod's understanding that the multilaterals, including the IDB, are keen to see legislation go through which sees the establishment of an effective credit bureau. Premier Credit has now built a platform, installed the relevant software and will be ready to go live as early as late summer. "We cannot operate a credit bureau now, because if we did,a it would be unlicensed and we do not want to be on the wrong side of the law. What we will do is switch the service on and people can see what it can do.When the legislation is in place we intend to apply for a licence and operate a full-service credit bureau. It is our intention to use Jamaica as a springboard before rolling out the service across the Caribbean in five years' time."

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