CREDIT REFERENCING BUREAUS AND BANK CREDIT
RISK: EVIDENCE FROM GHANA


Baah Aye Kusi, Elikplimi Komla Agbloyor,
Vera Ogeh Fiador and Kofi Achampong Osei
University of Ghana Business School

 

ABSTRACT

The study takes advantage of the introduction of Credit Referencing Bureaus (CRBs) in Ghana to provide evidence of the effects of information sharing, employing a Prais-Winsten panel estimation of 25 banks from 2006 to 2013. The study establishes that CRBs are negatively related to bank credit risk in Ghana. This implies that banks that use the services and products of CRBs in their operations are able to reduce their credit risk by reducing information asymmetry, which enhances banks predictive power on borrowers and also pressures borrowers to service their loans due to future denial of loan by banks. The study also found bank capital, size, loan concentration, gross domestic product growth rate and inflation rate to be significant determinants of bank credit risk. It is recommended that an expansion of the data source for CRBs and more publicity about CRBs presence in Ghana be embarked upon to improve the operations of both banks and CRBs.