The comprehensive nature of the information facilitates the development and validation of credit scoring models by the banking institutions, leading to more robust credit decisions. Information provided through CCRIS allows financial institutions to look beyond collateral and cash flow statements, to understand the borrowers’ track record in making payments. This undoubtedly contributes to higher loan growth and better asset quality. Since the inception of CCRIS in 2001, loan outstanding grew at an annual average rate of 8.9%, while the overall impairment ratio showed a significant decline  BIS central bankers’ speeches  1  from its peak of 16.2% in 2001 to 2.2% currently. The World Bank, in its Doing Business Report, has ranked Malaysia No. 1 for five consecutive years in the category of “Getting Credit”. Another example is the Credit Bureau Malaysia (CBM) which was established to assist SMEs build credible credit records from transactions outside the regulated banking system such as transactions with suppliers and utility companies. With this credible credit record, SMEs that utilise the formal banking system for the first time will be able to more effectively obtain access to finance. CBM also has a comprehensive credit scoring methodology which helps banking institutions assess the credit worthiness of potential customers. Further, CBM plays an important role in educating SMEs on how credit scores are calculated and how borrowers can improve their business operations and transaction conduct to improve their credit scores. At end-September 2012, CBM has 28,337 SME members and had produced 707,164 credit reports.

It may be worthwhile, as we discuss on current matters during the course of this training, to bear in mind and have foresight on the potential challenges that may surface from cross-border sharing of information, including the differences in legislative frameworks across different countries, confidentiality of information and network integration. Therefore, I note with interest that this workshop will also discuss the legal framework surrounding the credit reporting industry. In Malaysia, the Credit Reporting Agencies Act was gazetted in 2010, and is in the midst of being operationalised. The Act allows for the sharing of credit information in a regulated environment, primarily seeking to strike a balance between providing lenders with information for risk management purposes, and protecting borrowers’ rights to privacy. A Registrar has been set-up to oversee the implementation of the Act. The Office of the Registrar has regular engagements with credit reporting agencies to effectively implement the Act and ensure minimal disruption to the entire operations of the industry. While the benefits of a sound credit registry infrastructure are evident, it is critical to educate consumers on how to use their credit reports and to manage their level of debt. Financial education is, therefore, an important pillar which complements the work being done in enhancing credit information reporting. Proficiency in financial knowledge will contribute towards greater empowerment and competent financial decisions on the part of consumers, and also result in improved financial services by financial institutions. In Malaysia, financial education for adults is implemented through financial capability programmes, such as the POWER!