* Lack of finance a major hurdle for Africa's development
* Countries want credit bureaus to spur lending
* World Bank leading programme to promote credit bureaus
* Small finance can help Africa's huge informal sector
By David Dolan and Chris Mfula
LUSAKA/LAGOS, June 17 When Joyce Musonda wanted
to start a business two years ago selling kitchen tiles from her
backyard in an up-and-coming district of Zambia's capital of
Lusaka, she braced herself for a battle to find a start-up loan.
Her predicament is common: around 80 percent of sub-Saharan
adults have no bank accounts and struggle to access finance from
banks reluctant to lend to new customers, especially the small
entrepreneurs for whom they have no history.
Musonda's solution came from an unexpected quarter: she
discovered that Zambia - wanting to encourage more middle-class
business people like her - had set up a credit bureau to record
her credit history and show her to be a reliable customer.
Within days, the bank had approved a $3,000 loan. Musonda
now does brisk trade from the 20-foot steel container packed
with Chinese-made floor tiles and roofing that sits in the yard
of her freshly painted Lusaka home.
"Before the credit reference bureau I don't think I could
have been granted the loan with such ease," said the
Zambia's credit bureau, set up five years ago, still only
has data on 12 percent of the population, according to the World
Bank. The numbers are even lower, or non-existent, in other
But gradually, at the urging of the World Bank - which has
introduced programmes in 19 sub-Saharan countries to promote the
growth of credit bureaus - Zambia and other countries are doing
Making more entrepreneurs visible to banks not only
increases the number of loans but in turn lifts the larger
economy and creates employment - the ultimate goal.
"When there's little information, then there's little
financing," said Luz Maria Salamina of the International Finance
Corporation (IFC), an arm of the World Bank.
"When you extend credit to a very small company or business
and they expand their services, they impact society and they
create jobs," added Salamina, who leads an IFC programme to
promote the growth of credit bureaus in sub-Saharan Africa.
MAKING IT FORMAL
Loans from banks and micro-lenders also play a major role in
bringing cash-based small businesses - the so-called informal
sector that isn't usually taxed - into the formal economy.
The informal sector accounts for 55 percent of the economic
output in Sub-Saharan Africa and 80 percent of the labour force,
according to the African Development Bank.
In Nigeria alone, home to one of the continent's biggest
informal sectors, the IFC expects its credit bureau push to help
create $5.1 billion in lending to small businesses in the next
For other stories about Africa's informal sector:
S.Africa's rattletrap taxis move millions - and an economy
S.Africa's spaza shops suffer as big retail rolls in
That's an attractive prospect for investors, and some are
now stepping up for a slice of the action.
Private equity firm Actis this year took a stake in South
Africa's Compuscan, which operates credit bureaus in Africa.
"In many African markets the only way to get credit is if
you have some sort of physical asset that can be used as
collateral, or you are a well-known person," said Frank Lenisa,
a director at Compuscan.
"A credit report provides the consumer with another type of
asset, what we call reputational collateral."
A side-effect of this, bankers say, is that customers now
tend to pay off their debts more readily in order to protect
Most African credit bureaus only provide rudimentary data,
but that still helps banks size up potential borrowers.
"It helps you take a risk with your eyes wide open," said
George Akello, Standard Chartered's credit officer for
African retail banking
On the diesel-choked streets of Nigeria's biggest city,
Lagos, the reach of the informal economy is plain to see: women
sell bags of drinking water and young men hawk "Nollywood" DVDs
and paperback copies of "Think and Grow Rich".
With the help of more credit bureaus these street hawkers
could be the next small-scale entrepreneurs, analysts say.
That said, rolling out the bureaus is easier said than done,
and growth in many markets is slow.
Compuscan has had to come up with work-arounds in Uganda
where there are no national ID numbers, and instead introduced
biometric cards to track borrowers.
And among the banks themselves there is sometimes a
reluctance to understand why sharing of their customers' credit
data can make a difference to their business.
"It is still very much a cash-based economy," Compuscan's
Lenisa said. "Until they actually get together and love data
it's still a learning process."
(Editing by Sophie Walker)