Emcredit product to offer transparency

A new financial product from Emcredit – the UAE's first independent credit bureau – will enable the sharing of information about individual real estate buyers in the country's property market, although this information will not be available in the public domain, said a top official of the credit bureau.

The product, called the Property Profile Solution, is developed in conjunction with the Real Estate Regulatory Agency (Rera).

Emcredit will also gather the credit history of a buyer from his/her home country and will be in touch with other credit bureaus worldwide for this purpose.

"We are still waiting to go through an agreement for the federal government law to be passed. We hope it will be passed by the year-end. Right now it is under review," said Zaid Kamhawi, Chief Business Officer, Emcredit.

According to Emcredit, the Property Profile Solution will be provided to the real estate market through realty agencies, mortgage providers, conveyors, evaluators and other realty industry players.

"The solution will be based on Rera's inputs which will include access to information, such as who owns a particular property, thus getting to the bottom of the information of individual property owners in Dubai" he said.

Rera, which became a member of Emcredit in April, said, however, the information shared with Emcredit will not be for the public domain. "Rera will ensure that Emcredit shares the right information. Some of that information will be important, like a buyer's details, but this will not be for everybody's knowledge," said Mohammed Sultan Al Thani, Assistant Director-General of the Dubai Land Department.

Emcredit will ensure a balance between protecting the privacy of the individual and at the same time facilitating the flow of information. "When a lender comes to us and enquires about a borrower, we will make sure that we get the consent of the borrower before delivering the report," said Kamhawi.

The process entails that the member institution will sign a membership agreement, a code of conduct that will make the partnership 'virtual' and link the whole process in a technical integration. "Members will connect to our systems to enquire about an individual and everything will be automatic," said Kamhawi.

Emcredit is targeting the first quarter of 2009 to release the Property Profile Solution into the real estate market.

Meanwhile Emcredit has rolled out two services into the market – Embounce and Emscope. Through Embounce, Emcredit will detail a realty buyer's ability to honour cheque payments and will also facilitate in tracking the buyer's repayment history.

Its other service, Emscope, will involve credit information reports that will show consumers' creditworthiness, including total credit exposures, payment history and identification information for customers across the UAE. The new products are in line with Emcredit's strategy to reduce the lack of information with banks about the credit exposure and credit worthiness of their customers – a major cause of over-debt in the country, according to Emcredit.

"Embounce is a product that we have offered to the real estate market and realty agencies in particular, regarding the long-term leasing of their business. With this they can use the information to assess tenants before they assign leasing agreements and accept cheques from tenants," said Kamhawi.

Amlak Finance, an Islamic financier in the Middle East and one of the early members of Emcredit, has subscribed to both services.

"We have already implemented Embounce, which allows access to a comprehensive database of cheque default cases across the UAE. Embounce is a key service as it enhances the assessment process prior to accepting cheques as a form of security or payment method," said Arif Alharmi, Chief Executive Officer, Amlak Finance. "As part of our agreement with Emcredit, Amlak will also benefit from Emscope's credit information reports."

Amlak said its clients will not have access to the Emscope and Embounce database information. "At Amlak we respect and understand the importance of our clients' vital financial information.

"Information related to clients' identity documentation, personal information such as age, marital status, income and banking details are some of the information that we share with Emcredit only," said Alharmi.

Emcredit operates under the legal framework of a decree issued by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, to establish information sharing by banks as well as financial institutions.

"Our services, however, are extended to not only banks and financial institutions but also to real estate agencies and commercial enterprises. Basically, any entity in the UAE that requires information to enhance their assessment process can come and subscribe to Emcredit services," said Kamhawi

Better Homes has been enrolled as one of its members.

Meanwhile, Islamic finance provider, Tamweel, is in discussions with Emcredit regarding its membership with the credit bureau. "We are at an early stage of negotiations and are seriously evaluating the full suite of services offered by Emcredit," said Wasim Saifi, Chief Executive of Tamweel.

As a member, according to Tamweel, it will share information based on its agreement with Emcredit. "We will ensure that comprehensive data is shared for it to be useful. Tamweel places immense importance on client confidentiality and security of such data, and data sharing will be conducted under strict privacy guidelines," Saifi said.

Speaking to Emirates Business, Chris Dommett, chief executive of John Charcol, Dubai, said: "Full transparency from a credit bureau requires the active collaboration of the financial regulators and all players in the market, including banks, developers and service providers. The industry is definitely heading in the right direction and I believe Emcredit service will help lenders to
further gain the trust of consumers and increase accountability.

"In order for Emcredit to be successful, accurate banking data and consumer identification records will need to be kept by all members. This involves a great deal of co-ordination, which would ideally be facilitated by the Central Bank. However, the more financial institutions sign on and the more information they provide, the more effective the service will be."

The Dubai-based mortgage lender said they hoped to be able to offer credit verification as part of their service offering in the near future. "This will help us build a case for our clients when they apply for a mortgage and speed up the entire application process as the banks will no longer have to bear the burden of piecing together the credit history of the applicant," Dommett said.

Tamweel's Saifi said: "Access to information provided by a credit bureau is at their discretion. In mature markets, consumers can access their credit reports online for a nominal fee. With enhanced regulations coming in place here, we hope to reach that level of transparency soon. In a developing economy such as the UAE, this will probably take some time before consumers can access their credit reports."

Lenders also say a credit bureau such as Emcredit will be valuable and will play a much larger role than just be confined to real estate lending.

"The benefit from a credit bureau will be two-fold. Firstly, lenders will have tools that will enable them to make more informative decisions, and secondly, customers will have better access to their own data that is housed with lenders, and will learn how lenders are using it. The presence of a central credit report will enhance the accountability levels within consumers and create a level of self discipline as seen in more mature markets," said Amlak's Alharmi.

Saifi said: "The information they provide will be critical for all lenders to make credit decisions. Today, some consumer liabilities such as loans, credit cards, etc, are not known to lenders while evaluating a new credit request. This is leading to customer and lender overexposure. The availability of such information through credit bureaus will mitigate that risk significantly. This will naturally affect decline rate for credit requests, as lenders will now be equipped with more reliable, unbiased and comprehensive data. This will hold true for mortgage applications, as well.

"However, the success of the credit bureau initiative is heavily dependent on participation by large financial Institutions, as comprehensive customer position and credit information can be meaningfully developed only through a wider participation."

Dommet said for Emcredit to be effective everyone would have to contribute to the database. "If all financial firms in the country were obliged to submit data to a central credit bureau, it would benefit both the lender and the borrower. The banks would have the information they need to make quicker lending decisions, and loan defaults would be reduced," he said.

Membership fee on the Emscope facility, according to said Amlak, comprises a fixed annual charge and variable charges based on usage. The variable charge varies for commercial reports and consumer reports.

According to Emcredit: "We are a commercial entity; we do charge for our services. The membership fees are dependent on the size of the institution. Larger institutions will pay a larger membership fee with a higher initial cost. Regarding the variable charges for our reports that a member uses, the charges are purely based on volume of usage. Our price depends on how much the number of reports a member will be pulling from Emcredit. On an average, we will charge $4 for every information pulled from Emcredit," said Kamhawi.

Emcredit's members to-date include, Citibank, Dubai Islamic Bank, Dubai Bank, Noor Islamic Bank, Amlak Finance, Better Homes and Real Estate Regulatory Agency. The credit bureau has also signed data sharing agreement with government departments such as Dubai Police, Dubai eGovernment and Dubai Public Prosecution.

"A number of other banks, whose memberships are in the pipeline, have not yet been announced by Emcredit since they are waiting to complete their credit policies and understand how the information we can provide will improve their processing time.

As a rule, when we announce their names in our database they have to come forward and tell us how they can effectively use a vehicle like ours," said Kamhawi.