Credit Bureau Licensing Issues and Challenges:
Jordan Practical Case
Maha Alabdallat - Central Bank of Jordan
Rabat - 22nd -25th September, 2014
Session 4 bis
Ø  Central
Bank of Jordan (CBJ) operated a Public
Credit Registry since 1966,
ü Used by 25 banks, compulsory upload.
ü positive & negative information on businesses
& individuals
ü Threshold = JOD 20000 (USD 28000)
ü Monthly updates, on-line enquiries
Ø  Currently,
the primary source of credit information for
lenders in Jordan
ü Also, an informal database used by MFIs
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CBJ works to develop and improve an enabling
environment (legislative framework) for licensing a private
credit bureau for the following reasons:
Ø  Development
of financial infrastructure to enhance
financial inclusion (increase access to finance)
Ø  Supporting prudential supervision and monitoring
systemic risk and credit market.
Ø  Having an effective national credit reporting system
(for credit provider).
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Clear Oversight Responsibilities
Ownership Structure
-  Limited or private shareholding
-  Credit provider or data provider can not own more
than 5% of CB’s capital individually and 49%
collectively
Minimum capital requirements $2.8 million
Permissible data (credit information, utilities)
Clear provisions cover consumer rights
Inquires are mandatory for banks
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Formulating
a Steering
Committee
Issuing a tender
(RFP drafted by
IFC)
Setting-up
technical
evaluation (MFI,
Bank, Legal
Consultant)
Conducting site
visits to short
listed companies
Establishing Local
company with joint
ownership of
domestics
institutions(Banks
and others)
CBJ Roles
Creating a
dedicated team/
committee for
the purpose of
processing the
bureau license
application
Having support
from IFC and
consultants
Developing a
comprehensive
licensing
manual and
application form
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Stages
Requirements
Ownership
Initial
Approval
Management
Capacity
Financial Capacity
Final
Approval
Policies and Procedures
Specific Requirements
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1
•  The CBJ Committee assesses the completeness of the application, requests
additional information and supporting documents by sending a formal letter to
the applicant
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•  The committee assesses the application in each area as specified in the Law
and Bylaws and prepares a report containing the findings and discusses the
findings and concerns with IFC consultants, and then meets with the applicant
to confirm key aspects
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4
•  A formal letter is sent to the applicant indicating the specified weaknesses to
be addressed and improved
•  The committee produces a report that contains a formal recommendation for
a provisional license
•  A formal letter is sent regarding the decision and requesting the
documentations and requirements needed for the final approval.
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Technical areas of difficulty
(Hot Issues)
Comments
How to assess the
technical infrastructure
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Locally adapted and customized systems.
Security and back-up.
Limited access to the database.
Maintaining a database back-up.
Ensuring physical security.
Business continuity plan.
Security policies and procedures.
How to review the
adequacy of proposed
operational procedures
ü  Are they in place?
ü  Formulated in-line with data management standards.
ü  Avoid getting involved in the operational detail of the
applicant.
ü  Comply with legislation.
ü  Each area that is specified as a licensing requirement
has been addressed.
How to review the
Financial Plan
ü  Period to achieve financial viability
ü  How to assess the validity of the projections
ü  Relatively low volumes of data in Jordan
ü  Are revenue forecast realistic?
ü  Request independent auditor review.
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ü  Break- even point/how/when losses will be covered.
Technical areas of
difficulty
(Hot Issues)
Comments
Approval of the price of
enquiries
ü  Pressure by banks to keep price low
ü  Need of bureau for high price to break even
ü  How to address issues?
ü  Developing a mechanism to periodically review cost
and pricing from an efficiency perspective.
ü  Monitor the market.
ü  Natural monopoly.
Continuity of the
business
ü  Critical issue from the regulator ‘s perspective.
ü  Ownership of data.
ü  Arrangements that govern the exit or closure of
licensed C.B.
Evaluate technical
partner
ü  Technical: Willingness to implement the system in a
accordance with local technical specification.
ü  Track record in implementing credit reporting service.
ü  Strategic: Willingness to take equity position, financial
strength of the company, management profile
willingness and proposal for the transfer of know-how.
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Including banks, MFIs and Telco's (un regulated
participants)
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On-shore and Off-shore data storage
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Historical data
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Ø The legal framework plays a critical role in
the development of credit reporting
Ø Implementing a transparent licensing
procedure
Ø The following are considered critical
inputs for the licensing process :
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ownership structure
governance
operating plan
internal control and risk management
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Developing internal document/ procedure for licensing
process.
On-going coordination between all parties including
regulators.
Steering (industry) committee played an important role
in the management of the selection process
(establishment of P.C.B).
Supporting creation of national ID system.
Technical Assistance is essential for establishing P.C.B.
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Strong commitment of the key stakeholders.
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