5 private firms get licence to assess credit worthiness
They will determine borrowers’ credit risk through scoring and grading, helping lower default rates, interest rates
Highlights
- Bangladesh Bank issued LoIs to five firms to set up private credit bureaus
- Firms have one year to build infrastructure before final licences
- Bureaus will use AI/ML to create credit histories for individuals and businesses
- Experts say this will reduce defaults, lower lending risks, and expand access to credit
- Safeguards against misuse of personal data will be strictly monitored
Bangladesh is taking a major step to modernise its financial system with the introduction of private-sector credit bureaus, a move that experts believe will reshape lending practices and boost economic growth.
The Bangladesh Bank has issued Letters of Intent (LoI) to five companies, paving the way for the country's first private credit reporting agencies. This initiative aims to build comprehensive credit histories for individuals and businesses, ultimately reducing default rates and making loans more accessible and affordable.
The five selected firms, chosen from 13 shortlisted applicants, are: Creditinfobd (UK-backed), TransUnion (US-backed), First National Credit (US-Saudi-backed), City Credit (sponsored by City Bank), and bKash Credit (sponsored by bKash). The central bank has given the companies one year to establish their infrastructure before receiving their final licences.
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We received 22 applications to set up private credit bureaus, of which 13 were shortlisted by a technical and business evaluation committee. The top five applicants were then issued Letters of Intent (LoI).
Credit bureaus collect and analyse credit data from banks, financial institutions, and other service providers to generate reports and scores that show the creditworthiness of individuals and businesses.
While this marks Bangladesh's first private credit bureau initiative, India already operates multiple licensed private credit bureaus, including TransUnion CIBIL, CRIF High Mark, Experian, and Equifax, which provide credit information, reports, and scores to lenders.
Speaking to TBS, Arif Hossain Khan, spokesperson of the Bangladesh Bank, said, "We received 22 applications to set up private credit bureaus, of which 13 were shortlisted by a technical and business evaluation committee. The top five applicants were then issued Letters of Intent (LoI)."
He said that although five separate LoIs were issued, TransUnion and bKash will set up a company jointly.
The firms will now proceed to establish the necessary infrastructure and must apply for a final license before starting commercial operations. The central bank will grant final approval after conducting a physical inspection, Arif Hossain added.
The Bangladesh Bank invited applications to establish private-sector credit bureaus in March this year. Earlier, in June 2024, the government issued guidelines allowing private investors to set up credit bureau companies with a minimum paid-up capital of Tk10 crore.
Licensed credit bureaus will create accurate borrower profiles, making it easier to access loans from both local and foreign institutions. Strong credit ratings will lead to lower interest rates, while weaker ratings may carry slightly higher rates.
At present, the Credit Information Bureau (CIB), operated by the Bangladesh Bank, is the country's only authorised source of credit information for lenders, maintaining records only of existing borrowers of banks and non-bank financial institutions.
The new private-sector credit bureaus will assess credit risk for individuals and businesses through credit scoring and grading, leveraging modern technologies such as Artificial Intelligence and Machine Learning.
How will private-sector credit bureaus impact businesses
Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), told TBS that licensing private-sector credit bureaus to assess borrowers' business ratings is a positive step, enabling banks to verify information accurately, reduce defaults, and make the financial market more transparent and efficient.
"Currently, loan assessments are conducted manually by bank officers, often leading to collusion or inaccurate evaluations, and borrowers may lack the capacity to repay," she said.
"Licensed credit bureaus will create accurate borrower profiles, making it easier to access loans from both local and foreign institutions. Strong credit ratings will lead to lower interest rates, while weaker ratings may carry slightly higher rates," she continued.
This process will improve transparency, lower lending risks, encourage digital lending, and expand the private credit market, she said.
"However, the central bank must ensure strict safeguards against misuse of personal data and closely monitor these licensed firms," Fahmida added.
Ali Ahmmed, chief commercial officer of bKash, said, "Private-sector credit bureaus will create credit histories for customers based on their payment activity across platforms, helping lenders extend credit to new borrowers."
He explained that mobile financial service (MFS) customers, such as bKash's 8 crore users, are largely not covered by Bangladesh Bank's CIB, which tracks only borrowers of banks and non-bank financial institutions. As a result, many individuals and small entrepreneurs lack access to finance due to insufficient credit information.
The private credit bureaus will develop credit profiles based on payment behaviour, which customers can share with lenders to assess creditworthiness. Lenders can also access this information digitally, with customer consent, reducing the need for physical visits or manual documents.
Ali Ahmed added that credit histories will not only aid bank financing but also facilitate instalment purchases and other transactions. For example, sellers can evaluate a customer's payment capacity for mobile phones or even house rentals.
He called it a significant step for Bangladesh, as private-sector credit bureaus will help extend credit to the informal sector by making creditworthiness easier to assess.
Guidelines for private credit bureaus
According to the guidelines, private-sector credit bureaus will reduce information asymmetry about borrowers and provide clear operational rules for credit reporting and scoring companies. They will facilitate data sharing among credit and other financial service providers and make positive client information accessible to lenders, increasing competition and benefiting reliable borrowers.
By providing comprehensive credit information, the bureaus are expected to lower default rates and interest rates, encourage borrowers to maintain strong credit histories, reduce nonperforming loans (NPLs), and improve credit portfolio quality.
Additionally, private credit bureaus will expand private lending markets, enable faster and cheaper credit assessments, and promote digital lending for both individuals and enterprises, particularly CMSMEs.
Rules of establishment
According to the guidelines, any applicant seeking to establish a credit bureau must be a limited company. Investment from individuals or business entities incorporated outside Bangladesh is allowed.
The company can have up to eleven directors, with at least two having 10 years of banking experience and at least two having technology-related academic and professional backgrounds. A shareholder holding more than 2% of total shares is eligible to become a director.
The guidelines also state that no individual may serve as a director in more than one credit bureau at a time.
Mode of operation
Credit bureaus will follow a mixed model, collecting and analysing information from existing registries, regulated financial institutions, and other available sources for credit reporting and scoring. They will also collect basic personal data directly from individuals, with proper consent.
Following international best practices, data subjects own their data, and organisations holding such data must share it with the bureau once consent is given.
The Bangladesh Bank's Credit Information Bureau (CIB) will provide basic credit information, while additional data may come from other sources.
Credit bureaus will manage, store, and process credit information securely, and may share credit reports and scores with users, other bureaus, the Bangladesh Bank, government bodies, and authorised institutions, all while protecting the identity of the data subject.
Data-sharing scope
No personal data of a data subject may be shared among institutions handling customer information.
Only transactional data, credit history, payment habits, public information, or other relevant positive or negative data for assessing creditworthiness can be shared.
Data related to deposit account balances is strictly excluded.
Licensed credit bureaus may collect information only for permissible purposes, focusing on the data subject's debt exposure, repayment behaviour, and other contractual obligations.
All data providers and users, whether regulated by the Bangladesh Bank or not, must follow the same rules and obligations.
Credit bureaus can collect data from a wide range of sources, including banks, finance companies, the CIB, other licensed credit bureaus, mortgage and insurance companies, microfinance institutions, asset management companies, and courts.
They may also gather information from suppliers, service providers, MFS providers, telecom companies, utility companies, and any other organisations with relevant data, provided it serves the bureau's purposes and complies with the guidelines.
