World Cities Day 2024: Cities should be for people, not cars

November 1, 2024

DHAKA – Bangladesh has one of the highest non-performing loan (NPL) rates globally, with unofficial estimates exceeding 33 percent, though official reports place it at around 11 percent. This discrepancy highlights a lack of transparency in the country’s financial system. One key reason for this is the absence of a comprehensive credit bureau, leading to poor credit assessments and reckless lending, resulting in high default rates and instability in the banking sector. Successful models from Western and middle-income Asian countries demonstrate how credit bureaus help identify reliable borrowers and control high-risk lending.

The US has three major credit bureaus—Experian, Equifax and TransUnion—that track consumer credit information and generate credit scores based on debt repayment history, credit utilisation, and other factors. This helps lenders assess the borrowers’ risk levels before extending credit. Regulatory oversight is provided by the Consumer Financial Protection Bureau (CFPB), ensuring transparency, data accuracy, and consumer rights protection. In the EU, credit bureaus are similarly well-established, but regulations are more stringent under the General Data Protection Regulation (GDPR). They must ensure data accuracy and provide consumers with rights to access and correct their information. The UK similarly follows strict rules under the Financial Conduct Authority (FCA).

Malaysia provides a good Asian example. Its Central Credit Reference Information System (CCRIS) and CTOS (a private credit reporting agency) provide comprehensive credit information. CCRIS, managed by the central bank, gives lenders a holistic view of borrowers’ liabilities, supporting sound lending practices. India has