The lack of sophisticated credit data is preventing regional banks from resuming lending for fear of taking on more uncreditworthy customers.

“Banks’ main reason for not lending before were liquidity issues,” says Zaid Kamhawi, chief business officer of Dubai’sEmirates Credit Information Company (Emcredit),the UAE’s first and only credit bureau. “But today they say they can’t identify who is safe to lend to and so they’re choosing to not lend at all in many cases.”

Meanwhile, banks who are lending are resorting to the same insufficient criteria used prior to the crisis to decide which customers to lend to.

“Regional banks are still relying on getting information from customers, mainly asking them for their three month salary payslips,” says Kamhawi. “Less than half have fully automated application process systems and instead are relying on primitive score cards and modelling.”  

85 per cent of Mena banks identify weakness in credit information as a “very important obstacle to lending”, according to Emcredit research. 

Emcredit currently works with six banks in Dubai and has a 30 per cent data coverage of the banking population.

“Obviously, we are looking to increase our coverage, but banks need to contribute to developing a robust credit bureau,” says Kamhawi. “We’ve had several banks tell us that ignorance is bliss so they don’t want to work with us.”

Emcredit was established by the Dubai Department of Economic Development (DED) in 2006 to improve the standard of credit information services in the emirate and increase financial transparency. It is responsible for collecting, storing, analysing and disseminating credit information.

Kamhawi was speaking at MEED’s Middle East Retail Banking 2010 conference.