Credit Bureaus, also known as Credit Reporting Agencies or Credit Reference Agencies, are organizations that collect and maintain financial information about individuals. Their primary function is to compile credit reports and calculate credit scores based on an individual’s credit history and financial behavior. These reports are then used by lenders, such as banks and credit card companies, to evaluate the creditworthiness of individuals applying for loans, credit cards, or other financial products.  They play an important role in facilitating access to finance, especially for small and medium enterprises (SMEs), by reducing information asymmetry and enhancing risk management for lenders.

In other words, Credit Bureaus are like financial report cards for adults. They collect your money-related history and create a score that banks use to decide if they can trust you with a loan or credit card. Checking your “report card” can help you understand how good or not-so-good you are with money.

In the United Arab Emirates alone, total loans were reported at 470.661 USD bn in August 2023, signifying the importance of creditworthiness and Bureaus. In the financial landscape of the Middle East and North Africa (MENA) region, credit bureaus have become fundamental contributors. This piece seeks to offer a comprehensive examination of leading credit bureaus in the region, offering insights into their founding, market reach, availability, pricing structure, innovation initiatives, and the vital aspect of individual accessibility to credit reports.

Credit Bureaus in the MENA Region

In the MENA region, credit bureaus such as Al Etihad Credit Bureau in the UAE, SIMAH in Saudi Arabia, and the Egyptian Credit Bureau – I-Score, have become particularly essential in stimulating a more stable financial environment. This region has observed rapid economic growth and an upsurge in financial transactions in recent years, partly due to its expanding fintech sector and increasing consumer finance.

Credit bureaus play a pivotal role in managing and mitigating the associated credit risks by providing a standardized and reliable system for assessing creditworthiness, enabling lenders to make well-informed decisions. In Morocco, for instance, the Central Bank of Morocco’s Credit Information Office-Bank Al-Maghrib has been central to the increase in credit distribution efficiency, thereby supporting the emerging middle class.

Given the diverse economic landscape in the MENA region, with countries like Egypt and Jordan are striving to enhance financial inclusivity, these credit bureaus contribute significantly by facilitating access to credit for a broader segment of the population, including SMEs and rural communities. Moreover, they aid in reducing the level of non-performing loans, as evidenced by the reduced credit risk in the Qatari market after the establishment of the Qatar Credit Bureau. These agencies help lenders identify and manage potential risks associated with lending, which is crucial for maintaining economic stability in these dynamic markets.

Dynamics of Credit Bureaus in MENA

In the MENA region, the dynamics of credit bureaus are multifaceted, encompassing data coverage, credit scoring models, accessibility, and regulatory compliance. The variation in data coverage significantly influences the depth of insights provided to lenders. For instance, the Saudi Credit Bureau-SIMAH incorporates banking information alongside alternative data such as utility bill payment records and telecom payment behaviors, offering a more comprehensive view of creditworthiness.

The landscape is further complicated by diverse credit scoring models. Credit bureaus in the region might use proprietary algorithms, such as Vantage Score, or more universally recognized models, like FICO. Some even develop localized credit scoring solutions tailored to regional financial behaviors and trends, enhancing prediction accuracy for credit risk.

Accessibility to credit bureau services varies across the region, reflecting disparities in digital infrastructure and economic development. In tech-forward nations like the UAE, lenders and borrowers have near real-time access to credit information via online platforms, whereas in emerging markets such as Egypt, despite the presence of established bureaus like I-Score, access might be limited due to less penetration of digital services and a larger unbanked population.

Evaluating regulatory compliance also becomes crucial against this backdrop. Bureaus must navigate a tapestry of local and regional regulations. For example, in Jordan, the Credit Bureau abides by stringent data protection laws influenced by European standards, reassuring consumers and lending institutions alike regarding the security and privacy of their financial data. These factors collectively influence the efficacy and trust in credit bureau services and underscore the importance of adhering to international privacy and data security standards to maintain consumer confidence and operational integrity.

A Comparison

Credit bureaus in the MENA region exhibit distinctions in media visibility, adoption rates, organizational structures, and innovation approaches. Some are extensively covered and publicly embraced, while others operate more discreetly.

Al Etihad Credit Bureau (AECB)

Al Etihad Credit Bureau (AECB) is a federal government company that operates as a comprehensive credit reporting agency covering the entire UAE. Widely recognized in the media and throughout the country, AECB plays a crucial role in facilitating credit decisions. Its services include offering credit scores, credit reports, cheque scores, and even foreign credit reports. Individuals can access their credit reports for about AED 84 (including VAT), while companies are charged AED 157.50. A notable feature is AECB’s collaboration with Nova Credit, a leading consumer-permission credit bureau globally. This partnership enables newcomers to leverage their credit history from their home country when applying for financial services upon arriving in the UAE, enhancing inclusivity in the credit system.

Emcredit

Emcredit Ltd., a private company established in January 2006 under the directive of His Highness Sheikh Mohammed bin Rashid Al Maktoum, is a pioneer financial services company in the UAE. Emcredit operates at the forefront of providing vital information services to individuals and businesses. One of their innovative offerings is emBounce, a unique reporting tool in the UAE that allows users to access comprehensive information about cheque default cases on a case-by-case basis. This tool is instrumental in helping businesses safeguard their interests by providing valuable insights into their customers’ financial histories. With headquarters in the Europe, Middle East, and Africa (EMEA) region and a focus on the Gulf Cooperation Council (GCC) and the Middle East, Emcredit stands as a pivotal player in enhancing credit information services in the region.

Benefit-Bahrain

Benefit Company, a private entity based in Bahrain, serves as the operator of the national credit reference bureau. This company plays a crucial role in providing comprehensive financial services, including credit reports and scores. Notably, Benefit Company facilitates a consumer-friendly approach by offering individuals the opportunity to obtain their credit reports free of charge once every 12 months.

Bayan-KSA

Bayan Credit Bureau, established in 2017 as a Saudi joint-stock company, plays a pivotal role in providing integrated corporate credit services. Bayan Credit Bureau offers diverse services, founded by prominent entities like Thiqah Business Services, Takamol Holding, Alinma Bank, Al Bilad Bank, and GIB12. These include the Bayan Report, providing a comprehensive credit overview for clients and suppliers; Bayan Global, offering international credit reports; Bayan Indices, a business intelligence platform; Bayan Advise, a consultation service; Bayan Portal, allowing public access to credit reports; and Bayan Portfolio, a portfolio management tool. Beyond traditional credit reporting, Bayan Credit Bureau is at the forefront of innovation in the industry. It incorporates alternative data sources like utility bills and telecom payments for enhanced credit scoring and risk assessment. Additionally, the bureau focuses on value-added services such as credit monitoring, fraud prevention, identity verification, and financial education. Covering the entire Kingdom of Saudi Arabia and over 200 million registered global companies through its Bayan Global service.

In summing up, the role of credit bureaus in the MENA region cannot be overstated; they are cornerstones in the architecture of risk management, gateways to broadening financial inclusion, and catalysts for economic prosperity. Through their assessment and impact on borrowers’ credit profiles, these institutions directly shape the dynamics of loan origination, underwriting precision, and the cost of borrowing, thus reinforcing their pivotal position in supporting a resilient financial system. The industry’s inherent challenges serve as harbingers for continuous innovation and improvement, highlighting the indispensable function of credit bureaus within the financial ecosystem. A testament to their collaborative efforts to propel best practices forward is the establishment of the Middle East Credit Reporting Association (MECRA). This non-profit entity exemplifies the collective drive to optimize credit reporting efficacy, affirming a shared commitment to elevating the standards of credit information exchange across the MENA region.