The presence of a single credit bureau in a developing country can have an incredible impact on the citizens, the government, the financial service providers and the economy of such countries. While many take financial inclusion for granted, in developing countries access to financial products, especially credit, and financial education is difficult for many. In these countries, studies have found that the introduction of a credit bureau and financial education initiatives to be beneficial. However, in Sub-Saharan Africa, credit bureau establishment and financial education initiatives aren’t always prevalent. This contributes to financial exclusion in such countries which are not able to reap the economic benefits financial inclusion has.


Does a credit bureau promote financial inclusion?

A recent study investigating private credit in 129 countries established that creditor protection rights and availability of information-sharing institutions promoted inclusive financial growth. In addition, increased access to financial services has the potential to improve the macroeconomic environment and, in turn, financial inclusion.

Private and public credit bureaus were found to promote private credit development in developing countries more so than in already developed nations. Credit bureaus provide information and services that lenders use to assess the affordability and creditworthiness of prospective customers, as well as verify applicants. An increase in credit reference bureau services is expected to improve access to relevant customer information, thereby increasing access to credit, especially in developing countries where credit transaction information is difficult to obtain.

The percentage of individuals in a population with formal bank accounts and savings used as a proxy for financial inclusion has been found to promote economic growth and development by enhancing access to education and promoting entrepreneurship.

Overall, education, income, age, and gender have been found to influence financial inclusion – and macroeconomic growth.


Financial exclusion

Financial exclusion is a global issue, with an estimated 2 billion adults with around 40% of the world’s adult population currently ‘unbanked’, and millions of ‘thin file’ individuals and small, micro and medium enterprises (SMMEs) in sub-Saharan Africa. These are consumers with limited or no information on traditional credit bureaus, who find themselves excluded from mainstream finance. They often face more difficulty – and higher costs – when applying for financial products or services.


SME owner checking his free credit report from a local credit bureau.


Historically, financial exclusion prevented certain segments of the population from engaging in the mainstream financial sector thus limiting the participation of entire households in economic growth and development. The potential inherent in these segments of the population is likely to provide a positive and significant input into the economy. This is because financial inclusion is considered a critical building block for achieving inclusive economic growth.

Although remarkable progress in quantitative access has been made, it is yet to translate into economic inclusivity in most of the developing countries. Uptake of financial services has been rising in most developing countries alongside informal financial arrangements. As a result, the financial services portfolio does not provide the broad risk-pooling and low-cost services found in developed countries, exposing individuals to unlimited risks and higher costs associated with non-standardised informal services.

These informal services in developing countries have continued to co-exist with formal financial services, owing largely to the inability of the financial systems to accommodate poor people with low incomes.


Credit bureaus in Sub-Saharan Africa

In sub-Saharan Africa, South Africa, Mauritius and Kenya are the countries leading access to financial services, according to World Development Indicators 2012. The three leading countries in SSA also have well-functioning financial sectors capable of interfacing with the mobile money technology and any other financial innovations.

Acknowledging the need for a broad-based objective view of the state of financial inclusion in the country, the South African National Treasury has developed a Financial Inclusion Monitor. The aim is to establish a quantified and sufficiently detailed assessment of the current state of financial inclusion in South Africa. This will inform evidence-based policies and the design of effective financial inclusion initiatives and evaluate them over time.

The financial inclusion monitor aims to measure:

  • Ease of access in the sense of physical and electronic reach and affordability.
  • Usage – uptake and continued usage.
  • Quality – market conduct issues, client awareness, financial literacy, and customer treatment.

The data available on-demand for financial products suggests a constant increase in the number of adult South Africans who have access to financial services offered by authorised and regulated banks or non-bank financial service providers. The number increased from 68% in 2010 to 83% in 2015, taking into consideration all persons aged 16 or older.

The estimated number of people 15 years or older with access to a transaction account in 2014 was 70% – up from 54% in 2011.

Account ownership among South Africans is significantly higher than in the sub-Saharan Africa region as a whole and on par with ownership levels in other upper-middle-income countries. A 2014 study suggested that 70.3% of adults in South Africa have access to transaction accounts – including mobile money accounts – compared to 34.5% for Sub-Saharan Africa and 70.5% for other upper-middle-income countries.

When focusing only on mobile accounts, South Africa is ahead on all fronts with 14.4% of adults reporting owning a mobile account, compared to 11.5% for the Sub-Saharan Africa region.

The strong growth in the number of citizens having access to transaction accounts between 2004 and 2014 was largely driven by increased debit card ownership among more vulnerable populations. The percentage of individuals with transaction accounts in the Living Standards Measure (LSM) category 1 to 5 more than doubled between 2004 and 2014, increasing from 32% to 66%, compared to an increase from 74% to 80% for individuals classified as LSM 6 to 10. This improvement has made South Africa stand out in the region, with 57.8% of people in the lowest 40% that have accounts, compared to only 24.6% in sub-Saharan Africa.


A single credit bureau in a developing African country is shown to help promote financial inclusion and stimulate economies.


Benefits of financial inclusion

Financial inclusion affects the daily lives of people in a positive way and is part of the broader concept of social inclusion, the aim of which is to promote positive values of equal opportunities for all while reducing the ever-widening gap between rich and poor.

Financial progress is key to economic development, as access to a wide variety of financial products promotes smoothing of consumption, savings mobilisation and reduces exposure to risks. Financial systems that are inclusive allow for a wide variety of financial services to be accessed by the majority of people – many of whom are poor. Affordable and trusted financial systems are vital to facilitating efficient financial market operations. They are also likely to reduce the cost of information and transactions, boosting savings, mobilisation and promoting better investment decisions.

Further, financial systems characterised by trust are more likely to promote financial long-term growth and innovation prospects while facilitating expenditure smoothing and risk-pooling that will cushion consumers against unforeseen shocks. They are also a means for accessing other basic utilities such as quality education and health as well as clean and safe water. Thus, a stable and trusted financial scheme will control positive strategic decisions while creating a multiplier effect in other areas through its communication mechanisms.

For the growth benefits to trickle down to the lower spectrum, it is vital for financial inclusion to target the people who are under-served. Financial services access is likely to ease poverty growth if it targets the majority of consumers. Constrained access to and utilisation of financial services, on the other hand, exposes individuals to risks, decelerates savings rates and leads households to switch to informal network alternatives and access to credit.

In partnership with the Bank of Uganda, Compuscan established the first credit bureau in Uganda in 2008. In the World Bank’s Doing Business 2020 report, they state that “In Uganda the credit bureau expanded borrower coverage, improving access to credit information.” According to the Uganda Consumer Credit statistics, there is a sharp increase in consumer credit granted from 2008. A similar increase in the country’s GDP growth from the services sector can be observed in the same time period.


Young African woman using a phone to get her free credit report from a credit bureau.


Income associated with financial inclusion

Several studies investigating the determinants of financial inclusion have established that a higher income quintile was associated with deeper penetration of financial services. As a result, empirical findings predict a positive relationship between income and financial inclusion.

Providing adequate income opportunities to the underprivileged should improve inclusion by encouraging the use of products such as electronic payment systems. At the same time, the use of technology to deliver financial services may also improve to enhance inclusion.


Why a credit bureau should provide financial literacy

Creating awareness about availability and benefits of financial services is expected to improve inclusion, especially in low-income countries where the levels of education and financial literacy are still low.

A 2015 study of cashless policy in Nigeria found that awareness of electronic channels of accessing financial services had a positive effect on financial inclusion. Further, payment infrastructure was also found to have a positive effect on financial inclusion. This is because efficient and secure payment infrastructure reduces transaction costs, which in turn motivates the adoption of electronic payment products.

The study also found that improving the customer value proposition enhanced financial access, and an earlier study concluded that customer satisfaction improved access to financial services. The results show that product development initiatives should focus on satisfying the felt financial needs of the target population so as to enhance inclusion.

In South Africa, the National Credit Regulator requires credit bureaus to provide financial education to the general public. The Credit Bureau Association, together with the credit bureaus, are extremely active in promoting financial literacy amongst the population.


Digital financial literacy

A 2016 study investigating household welfare in Uganda concluded that access to mobile phone financial services had a positive effect on remittances. Specifically, households that had access to mobile phone-based money transfer services were more likely to receive remittances than those who did not. In addition, the frequency and value of remittance increased with access to mobile phone-based financial services.

The increase in remittance was attributed to the reduction in transaction costs associated with mobile phone money transfer services, especially in the rural areas where financial institutions such as banks are not easily accessible. An increase in remittances significantly improved welfare in terms of increased real per capita consumption.


Credit and financial literacy app

Financial inclusion aims to support wealth creation and contribute to the economy and so needs to extend to small, medium and micro enterprises (SMMEs), as job creation is most likely to take place in this sector.

The launch of a new smartphone app, GeleZAR, in South Africa, aims to bring more micro-entrepreneurs into the mainstream economy and ensure they get the credit scores they deserve.


Credit bureau in South Africa creates GeleZAR app to help SMEs learn about finances.


Using the expertise of its global innovation hubs, Experian has developed a financial education and credit scoring mobile app. GeleZAR is designed to educate entrepreneurs and individuals on how to manage their finances, budget and credit score in a fun, entertaining and user-friendly way. It can also advise individuals on how to maintain good credit health and recommends remedial actions where needed.

In partnership with a local South African consumer and fintech developer, Experian designed the app specifically for entry-level smartphones. The credit bureau is also working with one of the largest low-cost mobile phone retailers in Africa to trial the app which has been pre-installed on a range of its entry-level smartphones. The intention is to extend the rollout and make the app accessible free of charge on more than six million devices annually.

Working with alternative data that individual users consent to share on the app, GeleZAR will be able to assess users’ stability, build credit profiles and potentially improve their credit scores. This, in turn, could enable them to access a broader range of financial products at more affordable rates.


Free credit reports from credit bureaus

Credit bureaus in South Africa are required by law to give South African citizens one free credit report a year. By supplying credit reports, credit bureaus ensure that consumers have access to their credit information. This allows consumers to better manage their financial situations, dispute errors on their credit reports, and improve their credit reports and scores, which ultimately gives them access to additional credit products. In turn, this allows them to be more financially active, which has economic benefits.



Financial inclusion entails more than just access to a transactional account and financial products. It should be viewed as a means to give everyone a stake in the market economy with access to all aspects of the financial products and services they need to effectively manage their financial affairs, as well as financial literacy to help them manage their financial responsibilities. Financial inclusion enables wealth creation and contributes to employment creation and economic opportunity in the local and global marketplace.

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