{"id":273,"date":"2021-10-23T11:05:48","date_gmt":"2021-10-23T11:05:48","guid":{"rendered":"https:\/\/times.kaizenhighschool.com\/?p=273"},"modified":"2022-11-26T19:27:49","modified_gmt":"2022-11-26T19:27:49","slug":"turning-data-into-credit","status":"publish","type":"post","link":"https:\/\/times.kaizenhighschool.com\/index.php\/2021\/10\/23\/turning-data-into-credit\/","title":{"rendered":"Turning data into credit"},"content":{"rendered":"\n
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Due to the increasing level of financial exclusion, individuals are without access<\/p>\n\n\n\n

to common financial services. These can include but are not limited to: savings<\/p>\n\n\n\n

accounts, loans, cashless transactions, credit, and other traditional banking<\/p>\n\n\n\n

services. The central bank\u2019s third quarterly report, titled \u2018Private Credit<\/p>\n\n\n\n

Bureaus in Pakistan \u2013 Enhancing Credit Penetration by Addressing Information<\/p>\n\n\n\n

Asymmetries\u2019 provides valuable insight on actions that may allow for the<\/p>\n\n\n\n

augmentation of credit penetration and greater financial inclusion within the<\/p>\n\n\n\n

economy.<\/p>\n\n\n\n

A high level of government borrowing has reduced the financial capital available<\/p>\n\n\n\n

to private sector firms, as well as lead to trade imbalances and even financial<\/p>\n\n\n\n

crises and Pakistan\u2019s private sector credit to GDP ratio did not fare well; roughly<\/p>\n\n\n\n

17.4% in 2010-2019, in comparison to a whopping 18.5% in the 1990s. This ratio also fell short when compared to neighboring countries; India was able to muster a 97% ratio, Bangladesh: 44%, and Sri Lanka: 40%. The SPB report shed light on the role of private credit bureaus in boosting credit offtake. Extensive<\/p>\n\n\n\n

coverage of data-related services which are presented by credit bureaus across<\/p>\n\n\n\n

the world has been linked to the incrementation in private sector credit, the<\/p>\n\n\n\n

reduction of credit cost, as well as a decrease in non-performing loans.<\/p>\n\n\n\n

The current credit bureau coverage lists around 14.9 million individuals, with 12%<\/p>\n\n\n\n

of adults under the SPB\u2019s electronic credit information bureau, and another 7%<\/p>\n\n\n\n

under the two private credit bureaus known as \u2018DataCheck\u2019 and \u2018AISL\u2019. As per this<\/p>\n\n\n\n

the report, it is a plausible conclusion that Pakistan requires greater coverage of adult<\/p>\n\n\n\n

population in private credit bureaus, which, other countries with decent credit<\/p>\n\n\n\n

penetration has been able to procure.<\/p>\n\n\n\n

Non-financial data becomes a turning point for those individuals who had limited<\/p>\n\n\n\n

exposure to formal financial institutions. Regularly, Pakistanis are now<\/p>\n\n\n\n

able to bring about abundant units of information known as data points, which<\/p>\n\n\n\n

can be collected and amalgamated into significant insights with the use of new<\/p>\n\n\n\n

computing solutions and meticulous selection of criteria or benchmarks that are<\/p>\n\n\n\n

tailored to meet the demand of the local market.<\/p>\n\n\n\n

Examples of such data points include consumer data deriving from the usage of<\/p>\n\n\n\n

services such as cellular airtime recharge, household payment patterns, regular<\/p>\n\n\n\n

spendings, irregular purchases, and other payment transactions that may be card<\/p>\n\n\n\n

based or wallet-based. Non-traditional data such as tax filings and court rulings<\/p>\n\n\n\n

maybe another method to identify individuals meeting the benchmark for<\/p>\n\n\n\n

permissibility of loans and other forms of financial services.<\/p>\n\n\n\n

These methods, however, bring their fair share of hurdles. Initially, freeing up such<\/p>\n\n\n\n

alternate data is a difficult task as the non-financial service providers who control<\/p>\n\n\n\n

such data must become involved in this process; they must become members of<\/p>\n\n\n\n

credit bureaus for smooth and continuous data exchange. With a massive telecom<\/p>\n\n\n\n

density, payments related to telecommunications and usage data provide a<\/p>\n\n\n\n

variety of insights to explore. Nevertheless, since there are restrictions and<\/p>\n\n\n\n

limitations on telco\u2019s data sharing policy with third party individuals and<\/p>\n\n\n\n

organizations, the telecoms regulators will have to assess and go over the already<\/p>\n\n\n\n

existing policies and figure out how data can be shared while remaining within<\/p>\n\n\n\n

those policies as well as keeping in touch with data privacy.<\/p>\n\n\n\n

Other domains, such as the utility domain (besides K-electric), has not been provided<\/p>\n\n\n\n

access of utility payment data, to credit bureaus. Most electric and gas<\/p>\n\n\n\n

companies have shown hesitation to share such information, despite a<\/p>\n\n\n\n

government directive ordering them to, which can be dated back to April 2020.<\/p>\n\n\n\n

Furthermore, often, multiple families or individuals reside in one house and the<\/p>\n\n\n\n

billing meters can be in the name of the owners of the house instead of those<\/p>\n\n\n\n

who are actually using the utility services To resolve such an issue, the<\/p>\n\n\n\n

government must take steps that include firm encouragement for utility firms to<\/p>\n\n\n\n

share data with credit bureaus, as well as the inclusion of a mechanism which<\/p>\n\n\n\n

allows for the actual users of utilities to be noted down, as opposed to the house<\/p>\n\n\n\n

owners.<\/p>\n\n\n\n

Though a change in the legal and regulatory amendments to bring forth an alternate data eases such data collection, there are other issues in this process, cited by the special report. Such an issue is the creation of databases that properly record<\/p>\n\n\n\n

transactions such as monthly rental payments, and events like court decisions<\/p>\n\n\n\n

that influence individuals and entities. This, however, is not a short-term process,<\/p>\n\n\n\n

and the special report points out an urgent need for a national consensus on data<\/p>\n\n\n\n

and policy reform majorly directed towards conveying the data needs of the country.<\/p>\n\n\n\n

At the same time, the report also points out a need for having certain symptoms that can warrant data validity, accuracy, linkages, and preservation across various<\/p>\n\n\n\n

data touchpoints.<\/p>\n\n\n\n

The central bank surely has given forth fascinating information regarding financial inclusion, however, two big limitations remain prevalent in using alternate datasets to meet a particular goal. Primarily, in low trust environments full of passive aggression, and in a leakage-prone marketplace such as Pakistan, ensuring data privacy of individuals and firms is a rather difficult task. It is difficult to<\/p>\n\n\n\n

predict how comfortable an individual would feel in having several aspects of<\/p>\n\n\n\n

his\/her wallet activity made public to third parties. Moreover, it is highly unlikely<\/p>\n\n\n\n

that many bankers would accept individuals that arrived with decent credit scores<\/p>\n\n\n\n

but lacked collateral.<\/p>\n\n\n\n

Even so, such an alternate form of financial inclusion seems a satisfactory attempt<\/p>\n\n\n\n

of sorts.<\/p>\n","protected":false},"excerpt":{"rendered":"

Due to the increasing level of financial exclusion, individuals are without access to common financial services. These can include but are not limited to: savings accounts, loans, cashless transactions, credit, and other traditional banking services. The central bank\u2019s third quarterly report, titled \u2018Private Credit Bureaus in Pakistan \u2013 Enhancing Credit Penetration by Addressing Information Asymmetries\u2019 […]<\/p>\n","protected":false},"author":6,"featured_media":399,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_mi_skip_tracking":false},"categories":[6],"tags":[],"aioseo_notices":[],"relative_dates":{"created":"4 years ago","modified":"3 years ago"},"_links":{"self":[{"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/posts\/273"}],"collection":[{"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/comments?post=273"}],"version-history":[{"count":1,"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/posts\/273\/revisions"}],"predecessor-version":[{"id":274,"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/posts\/273\/revisions\/274"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/media\/399"}],"wp:attachment":[{"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/media?parent=273"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/categories?post=273"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/times.kaizenhighschool.com\/index.php\/wp-json\/wp\/v2\/tags?post=273"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}