• Facilitating Business Through A Credit Referencing System In Ghana
  • November 30, 2006
  • Law Firm: General Law Consult (GLC) - Accra Office



    An effective financial sector has been identified as key to creating a strong Ghanaian economy; driving the growth of other sectors through adequate and timeous allocation of resources.


    In recent times, Ghana has seen the proliferation of financial institutions. However, access to credit still remains low and interest rates remain high. One of the identified causes of this state of affairs has been the lack of credit information which increases the risk of lending.


    The need for an efficient legal and regulatory framework that addresses this deficiency and makes it easier for the business community to have access to credit cannot therefore be overemphasized.


    The credit reporting law will introduce a system for the formation, processing, storage and disclosure of credit information through the licensing, operation and supervision of credit bureaus.


    Operation of Credit Bureaus


    The proposed credit bureaus which will be licensed by the central Bank of Ghana shall in the performance of its functions access the following information:


    a)      Registered businesses and their operations


    b)      Property rights and transactions /mortgages and other charges


    c)       Reports on investigations and convictions on economic crimes held by the Police Service;


    d)      Court judgments, insolvency proceedings, criminal convictions, winding-up orders and rulings of administrative bodies.


    e)      Taxpayer registration and,


    f)        Bank account details,


    Powers & Functions Of Financial Institutions


    On the passage of the Act, banks, non-banking financial institutions, insurance companies, mutual funds, brokerage firms etc. may play a dual role under the Act; either as  Data Providers or  Credit Report Recipients.



    As data providers, financial institutions which provide credit shall with the written consent of a borrower provide credit bureaus with information on credit agreements entered into by borrowers and financial institutions. This information will include:


    a)      The amount of the loan facility, interest and payment terms

    b)      Outstanding loans including contingent liabilities

    c)       Security for the loan

    d)      goods and services provided on a credit basis together with contingent and possible obligations,

    e)      the agreed schedule of payment for the services,

    f)        information on the composition and the types of collateral that secured the payment obligations;


    However, the consent of a borrower shall not be required where:


    a)      the loan is  ninety days overdue and


    (i)            the amount of indebtedness is not in  dispute,

    (ii)          the customer has not made satisfactory proposals for repayment of the debt following a formal demand, and

    (iii)         the customer has been given at least twenty-eight days notice of the intention to disclose that information to the Credit Reference Bureau;


    b)            information on a person involved in financial malpractice;


    c)       Information on a person involved in the issuance of dishonoured cheques owing to lack of funds or fraud.


    As a credit report recipient, a financial institution shall be entitled to receive credit reports from licensed credit bureaus.  


    Implications For Access To Credit


    Decision By Financial Institutions To Grant Credit


    A financial institution shall prior to making a decision to grant or refuse an application for credit or other facility,  conduct a search with respect to a loan applicant’s credit record on the data base of one or more licensed credit bureaus.  



    Enforcement Of Security By Banks & Financial Institutions


    The initial draft of the law vested financial institutions with the power to realize the security provided by borrowers through private or public auctions without recourse to the courts once the debtor was notified of the creditors’ intention to realise the security.  However, this provision was on the passage of the Act.  




    Access to credit information is expected to reduce the risk of lending. The power  to sell  secured assets by financial institutions  without recourse to the court was lauded as a positive development from the standpoint of  financial institutions whose efforts at debt recovery has hitherto faced judicial and quasi – judicial obstacles. On the other hand, this was viewed as an additional stringent measure that would not have encouraged access to credit.  Either way, a lot will change in the financial sector in Ghana.