(MENAFN - Khaleej Times) Lenders would now have a complete credit history of their potential borrowers before them as the Al Etihad Credit Bureau is ready to go into operations within this quarter.
The bureau, a federal government company which will provide UAE-based credit reports and other financial information, is expected to complete all necessary procedures by the end of this month.
"The pilot phase of testing has been considered successful and we are now in the last stage of finalising the remaining agreements needed with our industry partners and testing the world-class technology that will facilitate the data transfer," Marwan Ahmad Lutfi, chief executive of Al Etihad Credit Bureau, said in a statement to Khaleej Times.
According to the statement, the bureau has approached all UAE-based banks to sign agreements and provide credit information via a process that will be completed by the end of January. "As soon as this has been achieved, along with receiving formal approval of the bureau's regulations and credit report charges from the UAE Cabinet, the Al Etihad Credit Bureau will commence operations," Lutfi added.
The financial industry, which faced the brunt of the 2008 global financial meltdown when they wrote off billions of dirham in credit defaults in the subsequent five years, has welcomed the bureau.
"Now, we can carry out our due diligence on an individual customer with the help of data gathered by the Al Etihad Credit Bureau," said a senior banker in Abu Dhabi. He said it will improve the quality of "our credit and portfolio".
Some insider say initially the bureau may not be able to end the tradition of Wasata, or reference, as a factor in obtaining personal credits in banks where it was popular earlier.
Over 15 years ago, a businessman grabbed headlines when he escaped after borrowing hundreds of millions of dirham from national and multinational banks. After that incident, the Central Bank of the UAE set up an informal Risk Bureau on corporate borrowers, which provided information to banks.
The new company will provide critical information on individual's borrowing and its credit worthiness, allowing the bank to decide on his loan request, with a treasure trove of data to analyse his loan-paying capacity.
The bureau will open opportunities for retailers to offer products in the future to customers with good credit history, on installments. According to an estimate, the borrowing costs are likely to fall by 30 per cent when the bureau will start its operations.
The bureau is currently finalising the installation of an electronic link with banks and financial institutions operating in the UAE in order to create a comprehensive database of individuals' and businesses' credit information.
Lutfi said that effectively run credit bureaus are internationally proven to support responsible lending, enhance payment behaviour and reduce credit losses from bad or non-performing debts.
"The credit bureau is currently completing the final steps of its pre-operational phase, which includes all financial institutions testing their data validity and accuracy in order for credit reports to be provided in a virtual based technique, along with training users on establishing internal roll-out plans for their operations and preparing to receive credit reports and the finalisation of agreements between partners and the bureau to provide credit information."
During initial testing, a number of financial institutions were able to provide more than 90 per cent accuracy and consistency in the submission of credit information, according to the Al Etihad Credit Bureau statement.
The first private credit information company in the UAE, Emcredit, according to its website, has collected 5.6 million individual identification records. It has 30 per cent of the UAE's mortgage data and 200,000 trade licence records. The credit information company shares its data with seven key government data sources.