RIYADH, 18 September 2004 — Faced with the massive problem of commercial fraud amounting to SR1 billion annually and the pressure to extend loan facilities to small and medium enterprises that account for nearly 93 percent of all private-sector establishments in the Kingdom, the country’s ten commercial banks have jointly set up a monitoring agency to address these problems in a transparent and verifiable manner.
This was disclosed to Arab News by Nabil A. Al-Mubarak, general manager and James Kavanagh, deputy general manager of the newly established Saudi Credit Bureau ((SIMAH), the only monitoring agency of its kind in the Middle East. The founding members of the agency are: National Commercial Bank, Riyad Bank, Al Rajhi Banking & Investment Corporation, Samba, The Saudi British Bank, Arab National Bank, Saudi Hollandi Bank, Banque Saudi Fransi, the Saudi Investment Bank and Bank Al Jazira.
In a joint interview with Arab News, they also announced that its data base would in future provide commercial credit reports relating to SMEs and evolve a system of credit scoring. Currently, these establishments are finding it difficult to obtain bank loans in the absence of financial guarantees. Their concerns will hence be addressed by SIMAH through a scoring system.
Another area of concern is commercial fraud. According to official reports, more than 15 percent of traders in Jeddah alone are known to engage in commercial fraud, including imitation of trademarks and dealing in counterfeit products.
The launch of the bureau comes at a time when Saudi banks are also battling the growing problem of defaulters estimated at 140,000 Saudis who together owe them SR1.3 billion. This, together with the problem of commercial fraud, will be the focus of a two-day seminar in Riyadh on Sept. 20. Representatives from the Kingdom and other Gulf states will participate in the event that is being organized by the Riyadh Chamber of Commerce and Industry in conjunction with the GCC general secretariat and the Federation of the GCC Chambers of Commerce and Industry.
Al-Mubarak said SIMAH has already stored data on thousands of customers in the first phase of its operations which began in March this year. Five new foreign banks will also join the bureau, since their applications have already been cleared by the Saudi Arabian Monetary Agency (SAMA), which inspired its launch.
Kavanagh, who also works as the compliance and audit manager of SIMAH, said the commercial banks in the Kingdom felt the need to gather information on the individuals to make it easier to process their loan applications. The system had already been in place before, but they were not using foolproof methods to evaluate the loan applicants in terms of risk management.
“SIMAH is a repository of information from all banks. Here we refine that information and transmit it back to the bank to expedite its decision-making process,” Kavanagh said, adding that it provides authentic data on each customer after cross-checking the information to make sure that it is authentic and accurate.
Speaking on their future plans, Al-Mubarak said that in the next stage they would concentrate on collecting data on commercial entities before moving on to the next phase concerning fraud. An important element in the assessment of commercial entities would be the scoring system. This will enable the banks to establish the credit worthiness of the individual or the commercial establishment. “We are also working on a scheme called ‘Know your customer’ in which the data will focus on identity fraud and financial fraud.”
In the case of identity fraud, the thrust of the exercise would be to ensure that the loan applicant and the recipient are the one and the same person. Confidentiality of the data will be strictly maintained and will not be given out to others in line with its code of conduct.
Asked about the modus operandi of SIMAH, Al-Mubarak said that in the case of individuals the data would be compiled on the basis of their Iqama and other relevant information gleaned from different sources. “The customer will have a right of access to information supplied by them. In that case, he will have to pay a certain fee. Nonetheless, we’ll be introducing a greater element of transparency in the banking operations,” he observed.
