Credit Reference Bureaux to rate SMEs

Credit reference bureaux are many in the world and now there is kenya Credit Reference Bureau . They handle rating and profiling for individuals and corporates.  The three top rating companies in the world are Moody’s, Fitch, Standard and Poors.

What are Credit Reference Bureaux

Such rating agencies try to establish or rate the likelihood of a loan being paid in the time agreed in the contract. They also help assess how much the loan interest should be charged. This process by the credit reference bureaux is referred to as loan pricing.

Plans are at an advanced stage for the credit reference bureaux to rate or profile small business Enterprises. This is scheduled to start in May 2012, in Kenya to determine their credit worthiness for banking in kenya.

Need for Credit Reference Bureaux rating SMEs

SMEs employ about 80% of the workers and had an 18% contribution to the Gross domestic Product (GDP) in 2011. This statistics make the growth of SMEs key to the government’s agenda especially considering  Vision 2030 for Kenya.

The credit reference bureau that will be profiling SMEs in Kenya is known as Metropol Corporation. The small business enterprises will use the profiles to get credit financing for growth.

Benefits of Credit Reference Bureaux rating SMEs

  • One of the major benefits of credit reference bureaux profiling, is that, the loans will be cheaper for the better rated Small and Medium Enterprises.
  • The profiling will be standard for all the firms without favouritism.
  • The rating will mean that attracting loans will be easier for those SMEs that are perceived to be less risky. One of the components of measuring risk is the ability of the SME to repay the loan advanced to it.
  • By rating an SME, any financier or potential financier is able to reduce the time it takes in the loans application and approval processing. Credit reference bureaux already has the necessary and required information, which would be readily available to the financing firm.

The credit reference bureaux are being supported by departments in the Government which deal with SMEs. The central Bank of Kenya and the Kenya Bankers Association have strongly supported Metropol corporation too.

Some Criteria used by Credit Reference Bureaux to rate SMEs

  • Business must have been in operation for 2 years at least.
  • Companies must submit profiles of their credit history. The credit history profiles will assist the credit reference bureaux to rate an SME. Some of the things that are considered in credit history is how the bank account has been operated for the last few years. Bureaus will also see if there is any history for unpaid cheques.

The above concept is the same concept that is used to rate countries all over the world. Countries are rated by credit reference bureaux like Standards and Poors, which last year downgraded United States of America. United States dropped from AAA to AA+.  Last year the rating for Kenya improved from previous years. The rating of SMEs by Credit Reference Bureaux will greatly improve SMEs access to financial loans.



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