The Relevance of Credit Reference Bureau and its Effect on the Financial Industry in Ghana

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The study examined the relevance of Credit Reference Bureau and its effect on the financial institution in Ghana. The specific objectives were: to investigate the loans and overdraft approval situations in Ghana; to find out consumers perceptions about CRB’s; to ascertain the kind of information provided by CRB’s; and to determine the possible effect CRB’s have on the access to credit by consumers in Ghana. The study adopted a quantitative research approach in answering research questions and used primary data in the analysis. The field survey was conducted in May 2012 by utilizing a questionnaire designed to collect data regarding the relevance of credit reference bureau and its effect on the financial industry in Ghana. One hundred questionnaires were issued to respondents (consumers) who were selected at random at the Banking Halls of ten Banks. Another ten questionnaires were issued to ten financial institutions which included commercial banks and other financial institutions that had used rating decisions from the credit reference bureaus. The research findings showed that most financial consumers do finance their personal projects through their personal funds or savings, family funds, money from friends and other means; very few actually do tend to the Bank. Organisations in Ghana mostly secure credit funds from the Bank for their projects. Again, a little over half of consumers within the financial industry had applied for loans or overdraft facility from their Banks. Others also stayed away because they simply were not interested. The research also established that most Ghanaian consumers do not know about the existence of Credit Reference Bureaus (CRBs). Again, data inputs required by the CRBs to generate reports on potential borrower(s) are provided by the lending institutions. The analysis of the data revealed that the major challenges facing consumers in accessing loans or overdrafts facilities from the financial institutions were high interest rates, lack of security or collateral, insufficient funds, personnel reasons and lack of experience board and management personnel for organizations. The findings of the research also established that consumers and lenders find the CRBs useful in the financial industry in Ghana which will lead to a bigger credit market, lower default and interest rate, improved profitability for the financial institutions, increase price competitiveness of credit facilities, instil good credit behaviour among lenders, improve pool of borrowers, expansion of lending and help improve access to credit in Ghana.
A Thesis submitted to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology, Kumasi in partial fulfillment of the requirements for the degree of Commonwealth Executive Masters of Business Administration, July-2012