Emcredit to create credit rating score.
The score would be based on the applicant's credit history, the payment (or non-payment) records, and how the individual was likely to meet his or her loan obligations in future.
Emcredit, newly empowered by being named Dubai's official credit bureau, will be the agency providing the rating scores for banks and other lenders to act upon.
But it will be another 12 months or so before the scoring system comes into place, said a senior Emcredit official.
"The top 10 or 12 banks operating in Dubai account for 80 per cent of the credit information that is out there," said Zeid Kamhawi, chief business officer.
"Presently, two of the top ten banks are our clients and our coverage of banking data is around 30 per cent.
"The immediate task is to get access to a substantial portion of the data with all of the others to attain critical mass.
"Between now and the next 12 months we should be in a position to work out the credit rating score for banks to base to take decisions on loan approvals.
"But Emcredit only provides the score on an individual's credit history, the final call on approving or rejecting the application has to be made by the concerned bank."
On May 2 Dubai passed a decree confirming Emcredit, wholly-owned by the Department of Econ-omic Development, as the emirate's official credit information agency.
This also made it mandatory for financial institutions operating in the emirate to join Emcredit's database.
The decree empowering Emcredit assumes urgency in the wake of the recent downturn and widespread concerns the local banking sector would be hit by a tidal wave of defaults.
"It creates obligations for the various banks to share information for the greater good of the sector and the economy," said Kamhawi.
"There was always a need for a credit rating bureau, and what the downturn and the new decree have done is create a formal structure for it to operate to full potential."
Getting access to the credit data of more banks and assimilating the information into Emcredit's data centre is no easy task.
On average, the process could take two to three months with each bank.
"It's not just any information that can be loaded into the data centre.
"It has to be valid to what we provide and be transparent to a level we are comfortable with," said Kamhawi.
A senior official with Dubai's Department of Economic Development (DED) declined to comment about the possibility of a federal credit rating agency being created.
The possibility of such an agency is being studied by the Ministry of Finance. The DED owns Emcredit, which was recently confirmed as the official credit bureau for Dubai.
"As far as Emcredit is concerned, the immediate future revolves around working closely with as many new clients as we can enter agreements with," said Ali Ebrahim, deputy director of DED.
"It's for the federal authorities to talk about a credit rating bureau that will operate at that level.
"But there are plans to shortly introduce certain tools to deal with bounced cheques."
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