Much of the developing world is still grappling with the issue of inadequate access to credit—both for individuals and for businesses. Uncertainty for lenders, the inability to leverage productive assets, and information asymmetry creates major hurdles in the lending ecosystem for Micro, Small and Medium Enterprises (MSMEs) as well as individuals. This has been exacerbated by weak legal and regulatory frameworks.
Yet things seem to be changing in the Europe and Central Asia region. Although the region experienced financial sector turmoil in 2015, it has been the biggest reformer over the past six years by significantly improving credit bureau coverage. In the most recent World Bank Doing Business report, the region recorded the best Credit Information Index (6.3 out of 8) among the emerging markets.
The Azerbaijan and Central Asia Financial Inclusion (ACAFI) project has been a significant catalyst to this process. Started by the World Bank Group and funded by SECO, the ACAFI project aims to improve access to financial services for individuals and MSMEs. It is doing this by supporting the development of efficient and sustainable credit infrastructure—or the set of laws and institutions that enables efficient and effective access to finance, stability and socially responsible economic growth, e.g. Credit Reporting Systems (CRS) and Secured Transactions (ST) Systems.
“CRS is a crucial and undisputed element of financial infrastructure that ensures a fair extension of credit for individuals and MSMEs. It helps unlock a variety of financial products for savings, credit, and risk management, catalyzing private sector development,” says Rolf Berhndt, Practice Manager, Finance, Competitiveness and Innovation Global Practice, World Bank Group.