Bawumia's credit scoring system a game changer - Dr. Bannor

Development Economist and Head of Research at the Danquah Institute (DI), Dr. Frank Bannor, has lauded NPP Flagbearer and Vice President, Dr Mahamudu Bawumia's proposal for a national credit scoring system, describing it as a "game changer" that holds significant promise for enhancing the development of Ghana's financial landscape.

This follows Dr Bawumia's proposal of a plan aimed at increasing mobile phone ownership among Ghanaians by making the devices more affordable through a structured payment system. He suggested that this initiative would significantly boost digital inclusion and economic participation across the country.

In an interview on ADOM TV BADWAM Show on Tuesday, July 23, 2024, Dr. Bannor explained that the initiative aims to establish a standardised method for evaluating individuals' creditworthiness across the country, promoting transparency and responsible financial behavior.

Departure from ad-hoc installment payments

The Development Economist stressed that the implementation of this system would mark a significant departure from the prevalent informal practices and the "high purchase system," which often rely on ad-hoc installment payments without a structured credit assessment process.

"The proposed national credit scoring system by Dr. Bawumia is a game changer. It will provide a fair and uniform means of assessing creditworthiness, which is essential for individuals seeking loans, credit cards, and other financial products. It would make life more dignifying and comfortable for Ghanaians," he stressed.

He cited Absa Bank's use of a credit scoring system, particularly for their Visa credit cards, as an example of how financial institutions can leverage standardized assessments to make informed decisions on credit issuance and risk management.

South Africa's case
Dr. Bannor also drew parallels with South Africa's successful implementation. He, therefore, indicated that Vice President Bawumia has the potential to replicate a similar credit scoring system in Ghana.

"Because of the credit scoring system in South Africa, it is helping them. It is benefiting underserved communities and small businesses, who previously faced challenges in accessing loans due to inadequate credit histories or lack of collateral. Now, with a clearer understanding of their creditworthiness, these groups can secure funding to invest in education, housing, and entrepreneurial ventures, thereby stimulating economic growth and reducing poverty levels," he indicated.

Game changing benefits
This system, he explained, would enable financial institutions in Ghana to evaluate an individual’s creditworthiness based on crucial factors such as credit history, income, debt levels, and repayment behavior. Such standardized evaluations would streamline the process of determining eligibility for loans, credit cards, and other financial products without requiring upfront payment.

"The credit scoring system will play a crucial role in promoting financial discipline among consumers. By encouraging responsible borrowing and repayment behaviors, it will contribute to improving credit profiles and fostering a healthier financial environment overall. This, in turn, will attract more investors and lenders into the market, creating a cycle of economic empowerment and sustainability," he added.

This, Dr. Bannor believes, would ultimately contribute to economic growth and stability in Ghana. He expressed optimism that when Dr. Bawumia is given the nod in 2024 presidential elections, with effective execution, the initiative would pave the way for a more inclusive and resilient financial ecosystem in Ghana.