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Transunion for transformative solutions to banks

Inadequate access to credit limits poor people from a fair share of resources in society, depriving them of basic needs and
opportunities in life. Universally, commercial
banks are facing problem of non-repayment of
loans. This problem can be overcome through
monitoring the behavior of borrowers. Thus,
the idea of establishing Credit Reference
Bureau (CRB) was conceived in order to assist
banks in determining credit worthiness of
their borrowers. CRBs allow for credit information sharing among the financial institutions.
Microfinance Directory recently interviewed
Mr. Billy Owino, CEO of TranUnion. Here are the
excerpts:
Tell us about your role as CEO of TransUnion
Kenya.
I essentially oversee the day-to-day business
management team at TransUnion Kenya,
which is home to our regional office. We
regularly also provide support for affiliate
offices in Rwanda, Zambia, Malawi, Namibia
and Botswana. As an international leader in
the risk and information management sector,
our core operations entail gathering, analysing and delivering information which aims to
transform the needs of our consumers and
business partners.
By virtue of being a part of Africa’s longest
operating credit bureau, I’m expected to
guide our team to explore new business
opportunities and initiatives. Our global
approach has come a long way in ensuring
that TransUnion manages more data than
any other risk information company in Africa.
We have been the credit reference bureau
platform pioneers, setting up operations in
an era when the sector was still unregulated.
Information sharing initially revolved around
bad debts and blacklisting, even as key
players quietly pushed for a global, full-file
approach in a concerted effort to turn the
business around.
When did you join TransUnion?
I have been here for almost a year now. It has
been an interesting journey; learning the
ropes and taking on the mandate to steer
TransUnion’s market leader status in a fastevolving sector. We operate in 32 countries
globally, hence the importance to acknowledge that business focus has shifted from
bad debts into providing all-round information solutions. This requires availability of
data to nurture financial inclusion, whilst
leveraging exposure to a bigger financial
universe and the provision of intellectual
property support.
What is your commercial background?
B. Owino: My background is hinged on ICT
business development. I started off in mobile
tech with a telecommunications stint at Kencell – now Airtel Kenya. I have worked across
different countries in numerous software,
data analytics and technologies firms, including mobile devices vendors. At TransUnion,
this was a regional head hunt role – the management team wanted to explore options
that empower mobile consumers.
It was crucial to unravel the negative tag tied
to Central Reserve Bank [CRB] practices. And
evidently, making delivery of information
and data available at consumers’ fingertips
holds the key to long-term responsible creditworthiness.
What is your current focus for TransUnion
Kenya?
So far, it has been a learning curve. When
I joined TransUnion, I took time to gain
insights about the firm as a market leader;
embracing the quest to steer growth as part
of the team here, which sits at the core of
our broader financial inclusion approach. It
is imperative that innovation drives our core
provider mandate to roll out transformative
solutions to banks, Micro-Finance Institutions [MFIs], Savings and Credit Co-operative
Organisations [SACCOs] and consumers
– guided by credit data reports and credit
performance scores. The information we
make available ought to inspire, for instance,
better and flexible lending terms for borrowers. I’m honoured to be part of this process to
develop practical and innovative solutions to
address indigenous challenges.
What is your vision for TransUnion Kenya?
I’m adapting quickly. My vision is guided
by the quest to transform the traditional
credit reference bureaus’ past perceptions,
best known for blacklisting defaulters and
borrowers. Gradually, micro-lenders and
consumers are coming to terms with changing trends. Almost every brand is now aware
that current clientele demographics differ
significantly than was the case in the recent
past. As service providers, I intend to ensure
we develop and offer bespoke solutions
enabling consumers to have practical access
to better, more affordable products in the
market. Our credit information sharing database and partnerships have been growing,
with most micro-lenders exploring options
on how best to leverage their assets.
What would you say were the key factors
that impacted the credit market during
2017?
It is evident that commercial bank lenders
have been grappling with lower advance

ments of credit services to consumers. This
implies that a percentage of creditors are
bracing for a lesser clientele base, and thus
likely to face lean cash flow spells owing
to inflexible repayment terms. But perhaps
interestingly, mobile transactions have registered and maintained a significant growth
arc. As cash lending takes on a digital outlook, recent statistics indicate shifting stakes.
Kenya is leading the way, not only regionally
but also on the global front, riding on the
wave of varied successful mobile money market innovations – and TransUnion is working
on bridging existing gaps.
Elaborate on the interest rate caps and
impact it had on both MFIsand SACCOs.
A Central Bank of Kenya report indicates
the interest rate caps regulations resulted in
the bank’s rejection of between two [2] to
almost three [3] million loan applications.
Multiple lenders collectively, cited numerous downturns and risk factors posed by
injecting capital in small and medium-sized
enterprises [SMEs] and low interest borrowers against a backdrop of uncertainty tied
to recent elections cycle. But even as banks
devise options to lower operating costs
as a stop-gap measure to sustain previous
margins, the interest rate caps legislation is a
boon for micro-lenders.
The existing MFIs, SACCOs and new players have opened their doors and taken up a
significant market share owing to their less
stringent loan approval terms. Mobile lenders
are likewise cashing in the credit sector by
either getting into partnerships with mainstream banks in addition to rolling out their
own tailor-made, innovative packages meant
to appeal to digital-savvy consumers.
What were some of the key changes in the
credit market?
Cash inflows in the micro-finance lending for
SMEs have significantly slowed down over
the past year. Potential borrowers are hardest
hit by rising inflation levels owing to an acute
credit unavailability. Notably, competition
to sustain businesses has resulted in banks
reviewing their loan packages and terms,
in an effort to shore up lending portfolios.
Despite indications that lending to SMEs still
constitutes a significant market base, the
new frontier appears to revolve around micro
loans, which are disbursed via mobile or
digital platforms, with minimal cash amounts
sent directly to borrowers.
The good news is that we have noted a
steady growth in lenders and consumers
opting to embrace the credit scoring methodology to assess the profiles of customers.
The ease of access to data in real time is a
significant milestone for us at TransUnion.
Full-file sharing entails lenders not only
having details on loan repayment defaults
but also the positive information, which in
essence can be used in allocation of credit
limits to borrowers.
This trend has shifted stakes especially for
clientele whose businesses are almost solely
dependent on mobile platforms transactions,
making the process efficient and faster.
Elaborate on IFRS 9 and the impact it will
have on both MFIs and SACCOs.
In the context of the Kenyan market, some
sections of the IFRS 9 will be instrumental and relevant to setting the requisite
standards necessary to spur growth in the
banking business sector. These include, for
instance, the assessment and classification of
financial assets and liabilities, among other
thorny aspects to be addressed in line with
the Central Bank of Kenya’s push for proper
loan loss provisioning. We are, however
working on integrating the required analytics within the data and information sharing
mechanisms sanctioned by the Credit Information Sharing Association of Kenya [CIS Kenya]. But in the long term, IFRS 9 is projected
to help streamline financial inclusion options
for consumers.
Microfinance Directory: What can we expect
to see in the Kenya credit landscape in 2018?
B. Owino: We are looking forward to more
positive growth and changes in the sector,
with the impact likely to be spread out by
way of having broader services and options
for lenders to engage with consumers. And
even as commercial banks make adjustments
owing to interest rates cap regulations, we
are optimistic the borrower credit-worthiness
or non-performing loans data shared by credit rating agencies should effectively widen
the pool of information available to lenders in the long term. This should also assist
banks as they move towards more qualitative
lending and risk-based interest rates pricing.
It is vital to explore, for instance, if special
loan packages can be designed to address
SMEs’ investment requirements. Indeed, this
is a looming challenge, which banks have to
innovate and work around this space.
What does the future look like for MFIs and
SACCOs beyond January – February 2018?
I should point out that expectations have
been quite high, with a growing pool of
especially grassroots investors, many who are
eager to learn about best practices to maximise their resources and assets. On the basis
of the data we have collected at TransUnion,
it is amazing to see the rate at which, MFIs
and SACCOs are transforming the lifestyles of
villagers across the board, in both rural and
urban regions in Kenya. This emergent movement is relying on the accessibility of financial support made affordable by the fast and
wide penetration of mobile money platforms
and services. The traditional lenders have
been compelled to play catch-up lest their
market share shrinks from the onslaught
driven by the popularity and informal nature
of digital transactions.
As the leading credit bureau in Kenya, how
does your team help MFIs and SACCOs
comply with new regulations?
We have various TransUnion teams who regularly engage and work with MFIs and SACCOs
in a partnership arrangement whereby we
organise and co-ordinate field seminars. The
objective of these workshops entails creating
awareness on the mutual benefits of our
services and products. We generate alerts
pegged on credit data and information sharing regulations. These details are sent out
as regular updates to our subscribers, and
also trickle down to active members of the
respective micro-lenders.
What challenges do these regulations present to MFIs?
The basic objective of credit data and information sharing aims to empower borrowers
with knowledge to ensure that their loans are
serviced within the agreed and mandatory
time-frames. The concept is thus beneficial
to consumers, as the lenders can access their
history which is crucial in raising the credit
level one can access over a given period.
But often things like the lack of capacity to
maintain and update records regularly has in
numerous cases resulted in miscommunication or breakdown in the status of available
data. To ease the process of collating the data
we require, MFIs need to be equipped with
the appropriate listing and credit scoring
mechanisms.

How can TU data, technology, partnerships
and differentiated solutions assist MFIs?
The responses and qualitative feedback
shared with us by our business partners,
even in top-tier commercial banks and MFIs,
are often amazing. Managers and policy
makers in these institutions express gratitude
whenever we engage their teams for training
and educational forums, as they gain insights
which have consistently helped turn around
their debt collection practices and non-performing loans management.
What challenges do these regulations present to SACCOs?
Ideally, SACCOs’ core product focus is pegged
on the provision of financial support to
member groups, which are likely involved in
different business models. But current regulations have significantly narrowed the gap
of operations between commercial banks
and SACCOs. TransUnion comes on board
as a consulting agency by offering alternate
solutions which facilitate better risk and cash
flow management mechanisms. We provide
data on specific potential revenue streams,
thus providing support to raise capital while
also enabling good customers retain access
to affordable credit services and subsequent
funds to invest and grow their business
ventures.
How can TU data, technology, partnerships
and differentiated solutions assist SACCOs?
We leverage on changing SACCOs’ approach
to credit management, and provide practical insights-based solutions. These are
essentially aimed at transforming policies,
decision-making mechanisms and tools
which help curb inefficiency in services
delivery. TransUnion taps into its credit data
analytics to build the profiles of creditworthy
clientele guided by the credit life cycle’s risk
projections.
How does TransUnion’s focus on consumer
education and credit awareness support
MFIs and SACCOs?
We have been advocating for the use of
alternative data sharing to increase and drive
better revenue collections for micro-lenders.
One of our core consumer service solutions is
the Know Your Customer [KYC] mechanism,
which leverages individual clients’ credit
score and history of their performing loans.
This helps to alleviate what is usually a long
and tedious application process. Furthermore, customers are empowered to negotiate for risk-based pricing and terms on basis
of SACCO lenders making use of automated
risk assessment and decision making tools.
What advice would you give MFIs and SACCOs in these challenging market conditions?
The key to generating business growth lies in
embracing innovative practices and business
development solutions. Over the recent past,
there has been a notable rise in consumers
opting to reach out to micro-lenders as opposed to the mainstream commercial banks.
This could be a pointer to shifting dynamics,
pegged on growing clientele confidence
and preference for the MFIs’ and SACCOs’
products, perceived to be affordable and flexible on basis of interest rates pegged on their
loans packages.
It is becoming increasingly important for
micro-lenders to explore different sectors
such as Agro-business, while also seeking
to tailor make personalized products, which
address the changing needs of new breed
of demanding consumers in a friendly and
timely manner.

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