Bankers Association of Malawi (BAM), a financial literacy think tank and experts have decried the underutilisation of credit reference bureau services in the country, leading to a surge in non-performing loans (NPLs).
The experts argue that most Malawians are unbanked, underbanked and heavily indebted, leading to NPLs haunting formal financial institutions.
In his book titled Facilitating Access to Finance—The Landscape of Malawian Credit Reference Bureau Services, financial sector expert Abel Mwenibanda called for massive awareness of credit reference bureau services to benefit consumers and the financial sector.
He said research has shown that credit reference bureau services help to bring sanity by enhancing responsible financial inclusion.
“Unfortunately while credit reference bureau services have clocked a decade in Malawi since the enactment of Credit Reference Bureau Act in 2010, on one hand, many Malawians are not aware of them let alone using the services,” said Mwenibanda, who is also managing director for Centre for Financial Inclusion and Literacy Consultancy.
He said in the face of digital financial technological advancements in the financial sector, review of credit information sharing systems and mobile money services is critical.
On his part, BAM president Kwanele Ngwenya, who is also NBS Bank plc chief executive officer admitted that credit reference bureau services are underutilised.
He said financial literacy is a catalyst for the attainment of financial inclusion as enshrined in the National Financial Literacy Strategy, National Financial Inclusion Strategy and Financial Sector Development Strategy, among others.
He said: “This book bridges the existing gaps in the financial sector in Malawi. As NBS Bank plc and BAM, we hold that credit reference bureau services form an integral part of a sound financial system”.
Commercial law specialist Allan Hans Muhome agreed that most Malawians are in the dark and do not even know the existence of the credit reference bureaus.
“Consequently, rights are forfeited while responsibilities are relinquished. Subsequently, non-performing loans continue to haunt financial institutions while many Malawians remain unbanked, underbanked and unreasonably indebted,” he said.
The credit reference bureau is mandated to collect and store credit histories of individuals and institutions to help determine their credit worthiness.