The Story Within The Story… Our cash-based society and credit bureaus

Feb 08, 2015 News

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By Leonard Gildarie

I saw something this week that raised my interest. When it was launched over a year ago, there was significant hype over Creditinfo Guyana’s entrance into the country.
The bureau is supposed to gather credit information from institutions, with which it has relations, which will then be used by participating entities to assess applications for loans and other forms of credit.
I am no expert in this field…far from it, but news that Creditinfo’s information was used by the Institute of Private Enterprise Development (IPED) to assess a loan application- for the first time in Guyana – seems to have been relegated to the background for other headlines. In coming years, though, the importance of that announcement by Creditinfo on Thursday will be seen.
The importance of credit in the finance world is well known. In the US, it is virtually impossible to exist without a good credit history. America literally runs on credit. You can’t walk into a store and shop with US$5,000 cash and say you want to shop. It will automatically raise the eyebrows of the attendants and cashiers.
In all likelihood, even if they accept it, you will have to answer questions as to how it is that you ended up with that amount. It is possible the cops will even arrive before you could exit the doors.
The reasons are simple. Almost every family in the US exists on credit cards. You go to Burger King and want a sandwich, a credit card (popularly called plastic) is used. People shop online, buy plane tickets and go on vacations with credit cards.
The introduction of tough anti-money laundering laws worldwide has made it even harder for large cash transactions in developed nations, particularly in North America and Europe.
There are numerous companies or bureaus in the US which track information on consumers’ payments of utilities and borrowings. Their track records on payments are shared with credit card companies, banks and host of other related entities.
In Guyana, we have places like Courts and Singer which offer hire purchase arrangements for goods. In the US, it is the same thing. So if you want that 70-inch Smart TV and go to buy it on credit from a particular store, they have the possibilities of accessing data kept by credit bureaus which tells them whether your credit history is good or otherwise.
Credit information plays a key role for US banks when they want to lend to customers for mortgages and host of other services. Essentially, you may not have a lot of cash, but your track record of paying bills and other commitments in time means a whole lot. It tells the lending agency that you are disciplined and do not represent a major risk, and could be used as a basis to predict future behaviour.
In other words, proper credit data helps lenders screen and monitor borrowers to avoid high-risk loans. For the developed countries, good credit means that you can access larger amounts, and can positively affect interest rates and other terms of a loan.
Having bad credit is a nightmare for many in the US. So is declaring bankruptcy.
Of course, Guyana is a whole different kettle of fish.
The introduction of a credit bureau is a good start in Guyana if we want to move positively into the future, but I foresee quite a number of years before it is to be utilized fully.
I say this because Guyana remains very much a cash-based society. We hear of people being robbed of enormous sums and you can only shake your head in despair and disbelief.
Why do we need to walk with so much cash? There are many reasons people walk with large amounts of cash. Many businesses are suspicious of cheques. They prefer cash. Cash is also easier to hide from taxes. Small wonder that bandits have been capitalizing, our open society allows the increasingly intelligent and watchful criminals to know which business is dealing with ready cash.
It is against this background that one can argue that many businesses have developed systems to keep most of their cash transactions off the tax radar. There are some businesses, it is being reported, that maintain two books – one for the taxman and the other that contains the true reflection of the business dealings.
People hate to have their finances being examined by third parties and that suspicion, I believe, is what will hold the march forward for entities like Creditinfo.
Another issue in Guyana, and at the risk of opening myself to criticism, is that our court system still leaves a lot to be desired. It takes years sometimes for a case to be heard.
So we do have some way to go in which we, as a people, need to be more accountable.
Like I said before, we will need to have an attitudinal change and maturity and adherence to the laws.
The use of initiatives like Creditinfo will serve to move us to the next sphere of doing business, but the question is: Are we ready to embrace new things? Are we preparing ourselves for a new way of doing business? Pressure from global happenings and the developed world will force us to change. I believe it’s only a matter of time.
Do enjoy the week and please continue to send those comments to [email protected] or call weekdays 2258491.

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