Credit Information Systems in Less-Developed Countries: Recent History and a Test

This paper provides an overview of the development and use of credit information systems in industrialized and developing countries. It also presents a test of the effects of a newly implemented credit information system in Guatemala. The paper attributes the weakening performance of microfinance in competitive environments to the absence of information sharing in these markets. Increases in formal sector lending among the poor has created a need for credit information systems that provide data about borrowers and help improve credit market performance and credit delivery to the poor.

The paper examines impact of Crediref, a centralized microfinance credit bureau in Guatemala. Study results demonstrate the positive role that information sharing can play in improving lending performance. Findings indicate that Crediref:

• Led to a decline in portfolio arrears between 2 and 3.5 percentage points six months after implementation in branch offices;
• Had a strong impact in decreasing the number of missed payments;
• Led to a decline in the number of late payments;
• Had the strongest impact in environments where repayment problems were the worst to begin with.