Credit Infrastructure

Overview

Access to credit for individuals and for businesses is severely constrained in much of the developing world. Weak legal and institutional frameworks for lending and debt resolution – combined with the lack of predictability for lenders, the inability to leverage productive assets, and the absence of credit information – creates a lending environment that is unfavorable to Micro, Small and Medium Enterprises (MSMEs) and individuals. “Credit infrastructure” refers to the set of laws and institutions that enables efficient and effective access to finance through modern insolvency frameworks, secured lending on movable property, which enhances financial stability through diversification of financial products and services and improves risk management, assessment and mitigation through information asymmetry and supports socially responsible economic growth. Expertise on credit information sharing, secured transactions and asset-based lending – as well as creditor/debtor rights and insolvency and debt resolution processes – are the main elements of the World Bank Group’s Credit Infrastructure services.  

What We Do

We provide timely, high-quality advice and strategic direction on issues involving credit infrastructure – through such World Bank Group products as IBRD & IDA lending operations,  Reimbursable Advisory Services and IFC’s Advisory Services – to ensure high-impact delivery to clients. The World Bank Group offers structured, comprehensive and multifaceted credit-infrastructure interventions using the following global business delivery model:

• Reforming credit infrastructure legal and regulatory frameworks,
• Creating and/or strengthening credit infrastructure institutions,
• Raising awareness and building capacity,
• Monitoring and evaluating the economic impact,
• Contributing to the World Bank Group’s engagement on and development of fintech for financing of SMEs,
• Setting international standards and promoting global knowledge and expertise exchange.

In addition, the World Bank Group is also the global standard-setter, designated by the Financial Stability Board, in the area of insolvency and creditor/debtor rights. It has developed the World Bank Principles for Effective Insolvency and Creditor/Debtor Regimes which, together with the UNCITRAL Legislative Guide, form the global standard for Insolvency. The Report on the Observance of Standards and Codes (ROSC) program provides a forum for countries to seek assistance from the World Bank Group on benchmarking against those international standards. The team also coordinates the work of the International Committee on Credit Reporting (ICCR), the only recognized international standard setter in credit reporting. The Committee supports a forward looking and broad approach to general and specific issues related to credit information, including the use of data and data analytics to build solid credit infrastructure platforms, while promoting policy to address challenges on matters of public interest.

Results

As of August 2019, the World Bank Group’s Credit Infrastructure portfolio includes about 142 active projects in more than 80 countries across six continents. More than 50% of those engagements are with clients from countries eligible for concessional financing from IDA.

Some of the key successful World Bank Group-supported credit infrastructure reforms include:

Credit Reporting: The World Bank Group supported the establishment of credit reporting systems (CRS) in in the UEMOA (covering eight countries in West Africa), Azerbaijan and supported the integration of microfinance institutions into the existing CRS in India.

• UEMOA (Bénin, Burkina Faso, Côte d’Ivoire, Guinée Bissau, Mali, Niger, Senegal, Togo): As of July 2019, the regional credit bureau in the UEMOA covered over 6 million individuals and over 117,000 enterprises across all eight countries. The bureau, which is the first ever cross-border credit information sharing platform, had received over 1 million inquiries cumulatively since beginning operations in 2017.
• Azerbaijan: The private credit bureau started operating since January 2018 and has generated over 1.7 million inquiries since then. 120 Financial Institutions and 6 non- financial credit providers such as telecom companies and Utility service providers are currently contributing to data to the bureau.
• Cambodia: As of December 2016, the Credit Bureau of Cambodia (which has been operational since 2012) covered 6.1 million consumers and SMEs. It has received 13.1 million inquiries cumulatively, which is estimated to have facilitated over $4.5 billion in financing. 
• India: Since 2011, 45 million incremental inquiries have been made by lenders and 299 incremental microfinance institutions have been providing data to two credit bureaus – High Mark and Equifax – which combined have 100 million micro-client records. This is now the largest repository of such data in the world.

Secured Transactions: The World Bank Group supported legal and regulatory reforms and helped establish modern and centralized electronic registries in Ghana, Vietnam, Mexico and Colombia. 

• Ghana: The project has created value of financing for about $14 billion, and more than 8,000 SMEs and 30,000 microenterprises have received loans. That has created hundreds of new jobs. In terms of the type of collateral, 25% has been inventory and receivables, 20% has been household goods and 19% has been vehicles. 
• Secured transactions and asset-based lending engagements in Mexico and Colombia have also led to advisory assistance to banks in the use of revised secured transactions frameworks for the development of fintech-based secured lending products for SMEs.
• Vietnam: As of June 2019, the project has created value of financing for about US$ 90 billion for nearly one million SMEs. The project has contributed to the development of an efficient legal and institutional framework for secured transactions in the country while also focusing on promoting asset-based lending.

Insolvency and Creditor/Debtor Rights: The World Bank Group supported the reform and implementation of modern insolvency regimes in Latvia, Mauritius and Thailand.

• Latvia: Introduced a voluntary out-of-court debt-restructuring mechanism. Recovery rates by creditors from insolvent firms increased 71% within five years after the reform.
• Mauritius: Introduced and helped implement a regulatory framework for insolvency practitioners. Recovery rates by creditors from insolvent firms increased 17% within two years after the reform.
• Thailand: Assisted in the development of the most recent amendments to the Bankruptcy Law, which introduced better voting mechanisms and stronger creditors’ protections.  Additionally, the team also helped in the reform process allowing private practitioners to become insolvency administrators.

Who We Work With

Credit Infrastructure clients typically include public and private constituents such as central banks; Ministries of Finance, Economy, Justice and Trade; commercial banks; chambers of commerce; courts; business associations; credit reporting service providers; Fintech companies and independent alternative dispute resolution centers.