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Mediamax Agency, Armenia
Dec 7 2007
Armenia occupies one of the leading position in the CIS as to the
ratio of residents, having a credit history
Interview of the Director of `ACRA Credit Reporting' Artak Arzoyan to
Mediamax Agency and Banks.am portal
- Please present a standard scheme of the work of a credit bureau
with a creditor-organization and the potential borrower. Assume that
the borrower turned to a bank to gain a mortgage credit: what will
the scenario of the further events look like?
- Receiving the application of the customer, the
creditor-organization is starting the assessment process of his
solvency, the level of which may be various - both from the point of
view of the spent time, and the information studied. Since in various
organizations the given process may be of different nature, I am
presenting the classic variant.
The first step on the way of assessment of the solvency is the
preliminary conclusion, based on the primary information, received
from the borrower, during which the documents, requested by the
creditor, are used, in particular, the documents identifying the
person, stating the financial status, etc. Having analyzed the
received documents, the creditor makes a preliminary decision on
whether to continue the process of solvency assessment or to refuse
the customer, if he/she does not meet the preliminary standards,
established by the creditor. If there is a positive conclusion, the
creditor turns to a credit bureau for receiving the credit history of
the customer, including the conscientiousness of fulfillment of
financial commitments by the given person, as well as the level and
the types of the commitments, taken by the customer upon
himself/herself. In this case, negative credit history may become a
ground to refuse the borrower, and the positive credit history, on
the contrary, may improve the conditions of the provided credit as to
its term and the interest rate.
- Credit Bureau is separately accumulating credit histories and
information on the borrower. Isn't one credit history enough for
gaining full information for the assessment of the risks and making
the decision? What is the aim of collection of information on the
borrowers?
- The information, collected on the borrowers, is of quite limited
character and it aims at securing the correct identification of the
borrower.
`ACRA' Credit Bureau collects data, identifying the person - passport
and social card numbers, addresses, dates of birth, residency.
Without this data, the probability of wrong formation of the credit
history increases, which is not allowable. As opposed to personal
data of the borrower, the information on his/her financial
commitments is much wider and includes any necessary information data
for the assessment of the borrower's solvency.
- What will be the outcome for the borrower, if he/she makes a
decision not to build a credit history? Doesn't the creditor have a
stereotype, according to which the ones, who are `against' us, are
`not with us'?
- In Armenia, a credit bureau works using the following pattern:
creditor-organizations provide the credit bureau information on all
the credits, basing on which there is a credit history formed. The
credit history may be provided to the creditor-organization only in
case the customer has given his/her consent. Thus, formation of
credit history does not depend on the will of the customer; however,
he/she may forbid the provision of the given information to other
people, not having his/her consent to that. Formation of credit
history in the first place meets the interests of the customer, since
it decreases the dissymmetric information, present in the system,
providing opportunity to conscientious and solvent borrowers to be
granted credits on more favorable conditions. Thus, if the customer
does not want to allow his/her credit history being used in the
process of crediting, this means that he/she has concerns that the
negative credit history may have negative influence on the crediting
process. There are many countries today, where the number of people,
having credit history, verges towards the number of adult population,
and the absence of credit history, or its blocking by the customer,
unanimously causes his/her dropping out from the crediting process.
- Is there a single school of credit history assessment for all the
creditor-organizations, in accordance with which the decision is made
on whether to provide or not to provide a credit? Since, often there
may be disputable situations, when the parameters of the credit
history will be on the borderline between `good' and `bad'.
- The assessment of the credit risk of the customer, expressed in
numbers, is realized by many credit bureaus. In `ACRA' credit bureau,
there is work initiated on implementation of credit scoring, which
will give single assessment of the credit risk of the customers,
basing on his/her credit history and the conscientiousness of
fulfillment of financial commitments. As a result, we will have an
assessment, expressed in a single number. However, the passing level,
in accordance with which the decision on crediting or on refusal is
made, is in the vision of the creditor-organization. Usually, in the
international practice, the creditor-organization clearly determines
the passing point, below which crediting is by no means realized. As
concerning the borrowers with a higher level of risks, certain
creditors may use crediting on high interest rates, in the view of
which the passing point, established by them, may be at a lower
level. The given fact once again points out the decrease of
dissymmetric information, since, not having met the requirements of
one creditor, the customer may receive a credit in another
organization, the market segment of which includes borrowers with
considerably higher level of risk. The beginner borrowers are usually
offered credit cards with small limits, by means of which the
necessary information for realization of credit scoring starts to
form. Besides the assessment of the credit risk by the credit bureau,
creditor-organizations also realize assessment of solvency of the
customer, basing on the personal data of the customer, which for the
most part takes place before receiving the information from the
credit bureau. At this stage, it already becomes clear whether the
customer meets the standards of the creditor or does not.
- Does the credit bureau carry out special statistics on what credits
are more problematic, and can we assume that the larger the volume of
the credit, the more problems there will be as to its repayment?
- At present, `ACRA' does not carry out such activity; however, it is
realizing a new project with the CB and the commercial banks of
Armenia, which provides for carrying out such analyses by credit
bureaus. In connection with the second part of the question, I can
say that it is not correct to consider only the volume of the credit
as a precondition of its riskyness. The credit, which is considered
large for one borrower, may be small for the other. Thus, the
likelihood of repayment of a volume credit depends exclusively on the
factors, characterizing the solvency of the borrower, which are taken
into account by the creditor before the provision of the credit.
- How many credit histories have you collected and how is this index
correlated with the present speeds of development of the credit
market?
- At present, there are about 500 thousand credit histories collected
in `ACRA' credit bureau. In accordance with the `Doing Business-2008'
research, realized by the World Bank, Armenia does not yield to the
Baltic countries as to the ratio of the population, having credit
history, and among the CIS states, it occupies one of the leading
positions. Since the credit bureau is provided information on all the
credits, the development of crediting market is reflected in the
increase of the number of credit histories as well. According to our
preliminary forecasts, by the end of 2008, the number of credit
histories will double at the expense of concluding the process of
input of the existing information into the system and the growth of
crediting volumes.
- How many creditor-organizations are your partners and according to
what financial scheme is your cooperation built? Does the borrower
have any financial commitments?
- 19 banks and 6 credit organizations have concluded agreements with
`ACRA'. In the nearest future, agreement with two more banks and five
credit organizations will be concluded as well. We plan to establish
cooperation with all the creditor-organizations by the end of the
first half of 2008.
ACRA services are not free of charge, and the creditors pay for
credit histories. Depending on the policy of the creditor, the
borrower pays the sum, or the creditor-organization includes the sum
in its operational expenditures. In fact, there may arise no other
financial responsibilities for the borrower.
- The specific nature of a credit bureau's activity provides for the
presence of serious technological basis, how are the things going
with you in the given direction?
- Today, `ACRA' credit bureau has all the necessary technological
solutions for the work with credit information. High level of
security of the information is provided, the services are provided in
on-line mode, and the transfer of information is regulated in detail.
The famous Dun&Bradstreet Company rendered assistance to us in the
implementation of the given technologies. The Company has many years'
work experience in the sphere of crediting information and is one of
the shareholders of `ACRA' credit bureau.
In 2008, a number of measures will be taken up, directed to the
renovation of information technologies and the existing computer
resource. Within the framework of the FSDP program, realized by
USAID, we are cooperating with EMG organization, hoping to have their
assistance in implementation of modern technologies.
- What main principles are set in the basis of the law `On credit
bureaus', which is in the process of elaboration, do they provide for
the so-called `punitive measures' for the participants of the credit
market?
- The draft law is based on principles, directed to strengthening the
protection of the customers' interests, providing information
security and trustworthiness of the data. The draft law is still at
the stage of elaboration and it is difficult to say what concrete
provisions it will consist of. The law provides for licensing of
credit bureaus, which implies certain sanctions concerning them. It
is possible that certain obligatory provisions for the participants
of the credit market will also be included in the draft law. There
will appear new relations and, naturally, new situations will arise,
which will have to be regulated.
- `ACRA Credit Reporting' is the only credit bureau in Armenia. Isn't
it `boring' to work without competitors?
- Taking into consideration the size of the financial-credit system
and the number of potential borrowers, I don not think that there
will be a new credit bureau established in Armenia in the nearest
future. In many countries of the world, one credit bureau is
functioning, which can be accredited to the specific nature of the
given business. In the draft law `On credit bureaus', there are
provisions included, which limit the opportunity for enjoying
dominating position and which secure equal conditions for all.
Considering this, I do not think that the fact of `solitude' of
`ACRA' in the market will cause any problems in the crediting market.
On the other hand, `ACRA' has a composition of shareholders, which
gives opportunity for healthy distribution of interests and allows
having corporate management even before the approval of the law.
- Dun&Bradstreet Company (D&B) is the strategic partner of `ACRA
Credit Reporting'. What does your strategic partnership include?
- D&B is one of the most experienced companies in the world in the
sphere of business-information. In the process of elaboration of
`ACRA' credit bureau's software support, D&B rendered us large-scale
consultation assistance, as a result, a reliable system of
information circulation was formed. One of the stages of strategic
development program of `ACRA' provides for circulation of
business-information, and the assistance of D&B will be very useful
for us. Today, the discussion on further cooperation directions is in
process.
From: Emil Lazarian | Ararat NewsPress
Dec 7 2007
Armenia occupies one of the leading position in the CIS as to the
ratio of residents, having a credit history
Interview of the Director of `ACRA Credit Reporting' Artak Arzoyan to
Mediamax Agency and Banks.am portal
- Please present a standard scheme of the work of a credit bureau
with a creditor-organization and the potential borrower. Assume that
the borrower turned to a bank to gain a mortgage credit: what will
the scenario of the further events look like?
- Receiving the application of the customer, the
creditor-organization is starting the assessment process of his
solvency, the level of which may be various - both from the point of
view of the spent time, and the information studied. Since in various
organizations the given process may be of different nature, I am
presenting the classic variant.
The first step on the way of assessment of the solvency is the
preliminary conclusion, based on the primary information, received
from the borrower, during which the documents, requested by the
creditor, are used, in particular, the documents identifying the
person, stating the financial status, etc. Having analyzed the
received documents, the creditor makes a preliminary decision on
whether to continue the process of solvency assessment or to refuse
the customer, if he/she does not meet the preliminary standards,
established by the creditor. If there is a positive conclusion, the
creditor turns to a credit bureau for receiving the credit history of
the customer, including the conscientiousness of fulfillment of
financial commitments by the given person, as well as the level and
the types of the commitments, taken by the customer upon
himself/herself. In this case, negative credit history may become a
ground to refuse the borrower, and the positive credit history, on
the contrary, may improve the conditions of the provided credit as to
its term and the interest rate.
- Credit Bureau is separately accumulating credit histories and
information on the borrower. Isn't one credit history enough for
gaining full information for the assessment of the risks and making
the decision? What is the aim of collection of information on the
borrowers?
- The information, collected on the borrowers, is of quite limited
character and it aims at securing the correct identification of the
borrower.
`ACRA' Credit Bureau collects data, identifying the person - passport
and social card numbers, addresses, dates of birth, residency.
Without this data, the probability of wrong formation of the credit
history increases, which is not allowable. As opposed to personal
data of the borrower, the information on his/her financial
commitments is much wider and includes any necessary information data
for the assessment of the borrower's solvency.
- What will be the outcome for the borrower, if he/she makes a
decision not to build a credit history? Doesn't the creditor have a
stereotype, according to which the ones, who are `against' us, are
`not with us'?
- In Armenia, a credit bureau works using the following pattern:
creditor-organizations provide the credit bureau information on all
the credits, basing on which there is a credit history formed. The
credit history may be provided to the creditor-organization only in
case the customer has given his/her consent. Thus, formation of
credit history does not depend on the will of the customer; however,
he/she may forbid the provision of the given information to other
people, not having his/her consent to that. Formation of credit
history in the first place meets the interests of the customer, since
it decreases the dissymmetric information, present in the system,
providing opportunity to conscientious and solvent borrowers to be
granted credits on more favorable conditions. Thus, if the customer
does not want to allow his/her credit history being used in the
process of crediting, this means that he/she has concerns that the
negative credit history may have negative influence on the crediting
process. There are many countries today, where the number of people,
having credit history, verges towards the number of adult population,
and the absence of credit history, or its blocking by the customer,
unanimously causes his/her dropping out from the crediting process.
- Is there a single school of credit history assessment for all the
creditor-organizations, in accordance with which the decision is made
on whether to provide or not to provide a credit? Since, often there
may be disputable situations, when the parameters of the credit
history will be on the borderline between `good' and `bad'.
- The assessment of the credit risk of the customer, expressed in
numbers, is realized by many credit bureaus. In `ACRA' credit bureau,
there is work initiated on implementation of credit scoring, which
will give single assessment of the credit risk of the customers,
basing on his/her credit history and the conscientiousness of
fulfillment of financial commitments. As a result, we will have an
assessment, expressed in a single number. However, the passing level,
in accordance with which the decision on crediting or on refusal is
made, is in the vision of the creditor-organization. Usually, in the
international practice, the creditor-organization clearly determines
the passing point, below which crediting is by no means realized. As
concerning the borrowers with a higher level of risks, certain
creditors may use crediting on high interest rates, in the view of
which the passing point, established by them, may be at a lower
level. The given fact once again points out the decrease of
dissymmetric information, since, not having met the requirements of
one creditor, the customer may receive a credit in another
organization, the market segment of which includes borrowers with
considerably higher level of risk. The beginner borrowers are usually
offered credit cards with small limits, by means of which the
necessary information for realization of credit scoring starts to
form. Besides the assessment of the credit risk by the credit bureau,
creditor-organizations also realize assessment of solvency of the
customer, basing on the personal data of the customer, which for the
most part takes place before receiving the information from the
credit bureau. At this stage, it already becomes clear whether the
customer meets the standards of the creditor or does not.
- Does the credit bureau carry out special statistics on what credits
are more problematic, and can we assume that the larger the volume of
the credit, the more problems there will be as to its repayment?
- At present, `ACRA' does not carry out such activity; however, it is
realizing a new project with the CB and the commercial banks of
Armenia, which provides for carrying out such analyses by credit
bureaus. In connection with the second part of the question, I can
say that it is not correct to consider only the volume of the credit
as a precondition of its riskyness. The credit, which is considered
large for one borrower, may be small for the other. Thus, the
likelihood of repayment of a volume credit depends exclusively on the
factors, characterizing the solvency of the borrower, which are taken
into account by the creditor before the provision of the credit.
- How many credit histories have you collected and how is this index
correlated with the present speeds of development of the credit
market?
- At present, there are about 500 thousand credit histories collected
in `ACRA' credit bureau. In accordance with the `Doing Business-2008'
research, realized by the World Bank, Armenia does not yield to the
Baltic countries as to the ratio of the population, having credit
history, and among the CIS states, it occupies one of the leading
positions. Since the credit bureau is provided information on all the
credits, the development of crediting market is reflected in the
increase of the number of credit histories as well. According to our
preliminary forecasts, by the end of 2008, the number of credit
histories will double at the expense of concluding the process of
input of the existing information into the system and the growth of
crediting volumes.
- How many creditor-organizations are your partners and according to
what financial scheme is your cooperation built? Does the borrower
have any financial commitments?
- 19 banks and 6 credit organizations have concluded agreements with
`ACRA'. In the nearest future, agreement with two more banks and five
credit organizations will be concluded as well. We plan to establish
cooperation with all the creditor-organizations by the end of the
first half of 2008.
ACRA services are not free of charge, and the creditors pay for
credit histories. Depending on the policy of the creditor, the
borrower pays the sum, or the creditor-organization includes the sum
in its operational expenditures. In fact, there may arise no other
financial responsibilities for the borrower.
- The specific nature of a credit bureau's activity provides for the
presence of serious technological basis, how are the things going
with you in the given direction?
- Today, `ACRA' credit bureau has all the necessary technological
solutions for the work with credit information. High level of
security of the information is provided, the services are provided in
on-line mode, and the transfer of information is regulated in detail.
The famous Dun&Bradstreet Company rendered assistance to us in the
implementation of the given technologies. The Company has many years'
work experience in the sphere of crediting information and is one of
the shareholders of `ACRA' credit bureau.
In 2008, a number of measures will be taken up, directed to the
renovation of information technologies and the existing computer
resource. Within the framework of the FSDP program, realized by
USAID, we are cooperating with EMG organization, hoping to have their
assistance in implementation of modern technologies.
- What main principles are set in the basis of the law `On credit
bureaus', which is in the process of elaboration, do they provide for
the so-called `punitive measures' for the participants of the credit
market?
- The draft law is based on principles, directed to strengthening the
protection of the customers' interests, providing information
security and trustworthiness of the data. The draft law is still at
the stage of elaboration and it is difficult to say what concrete
provisions it will consist of. The law provides for licensing of
credit bureaus, which implies certain sanctions concerning them. It
is possible that certain obligatory provisions for the participants
of the credit market will also be included in the draft law. There
will appear new relations and, naturally, new situations will arise,
which will have to be regulated.
- `ACRA Credit Reporting' is the only credit bureau in Armenia. Isn't
it `boring' to work without competitors?
- Taking into consideration the size of the financial-credit system
and the number of potential borrowers, I don not think that there
will be a new credit bureau established in Armenia in the nearest
future. In many countries of the world, one credit bureau is
functioning, which can be accredited to the specific nature of the
given business. In the draft law `On credit bureaus', there are
provisions included, which limit the opportunity for enjoying
dominating position and which secure equal conditions for all.
Considering this, I do not think that the fact of `solitude' of
`ACRA' in the market will cause any problems in the crediting market.
On the other hand, `ACRA' has a composition of shareholders, which
gives opportunity for healthy distribution of interests and allows
having corporate management even before the approval of the law.
- Dun&Bradstreet Company (D&B) is the strategic partner of `ACRA
Credit Reporting'. What does your strategic partnership include?
- D&B is one of the most experienced companies in the world in the
sphere of business-information. In the process of elaboration of
`ACRA' credit bureau's software support, D&B rendered us large-scale
consultation assistance, as a result, a reliable system of
information circulation was formed. One of the stages of strategic
development program of `ACRA' provides for circulation of
business-information, and the assistance of D&B will be very useful
for us. Today, the discussion on further cooperation directions is in
process.
From: Emil Lazarian | Ararat NewsPress