Thursday, June 20, 2024

Data sharing will low bad loans

The global risk and information solutions provider TransUnion Africa has advised market participants in Botswana to improve their compliance and data sharing-sharing practices, a development which will mitigate risks.

In a workshop hosted by the company last week in Gaborone, it was disclosed that better quality data and risk-based solutions across the financial services sector will lower their lending risks by reducing non-performing loans, allowing the lenders not only to protect their profitability but also improving financial inclusion through responsible lending.

“The use of data to make credit decisions in Botswana is still fairly low, by global standards. By using data-driven insights, businesses can get a comprehensive view of consumers and have the information they need to make more confident decisions and better manage risk and relationships throughout the customer credit life cycle,” Kabelo Ramaselwana, TransUnion’s acting country manager said during the workshop.

According to statistics shared, there were 277,762 household borrowers in Botswana, with a total of P33.1 billion of loans extended by commercial banks. The bulk of households’ loans were made up of unsecured personal loans, averaging about 67 percent of household debts.

Ramaselwana said this reflects a significant shift in the composition of household debt over the past two decades, revealing that in 2000, unsecured personal loans made up only 45 percent of the balance of household borrowings.

“Average annual cash earnings in Botswana had increased by 5.1 percent over the decade up to 2017, compared to an inflation average of 6 percent. This was putting growing pressure on disposable income levels for households, making it increasingly important for banks and lenders to make the right lending decisions to drive greater financial inclusion and financial wellness” he said.

TransUnion Africa’s Chad Reimers, who is responsible for the company’s African operations outside South Africa, said the company was continually seeking to engage local banks, lenders and businesses to improve the quality of data.

“Inconsistent data quality means that the industry as a whole is at a disadvantage when it comes to making decisions. This leads to greater risk in decision-making, which leads to increased cost of credit as providers price for this risk. By getting access to more comprehensive data and better insights, businesses can better understand consumers, and thus provide better services and offerings,” said Reimers.

“This will have a significant impact on the ability of consumers to access financial services to help achieve their personal objectives, whether purchasing a house, or funding their education goals.”


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