Saudi Credit Bureau banks on sophisticated mechanisms

The Saudi Credit Bureau (SIMAH) is playing a crucial role in bringing down the value of bouncing checks in the Kingdom, says its CEO Nabil Al-Mubarak.
“Check bouncing has been coming down. The role of SIMAH in this campaign remarkable,” he told Arab News in an exclusive interview.
The value of checks bounced came down to SR3.8 billion in 2012 from a high of SR15 billion in 2009. “In cooperation with Saudi Arabian Monetary Agency (SAMA), Saudi Credit Bureau (SIMAH) has made its own contribution toward this,” says the CEO.
“With the support of SAMA, the central bank of Saudi Arabia, we launched the first Bouncing Check Registry System (BCRS) along with a wide awareness campaign called ‘All Checks are Monitored’. Any bouncing check now is registered in the credit report. The 2010 launch of BCRS represents the cornerstone in reducing the value of bounced checks,” Al-Mubarak told Arab News in an exclusive interview.
The 2010 launch of BCRS represents the cornerstone in reducing the value of bounced checks, he added.
 
The following are highlights of the interview:
 
How do you evaluate SIMAH’s role in the framework of the Kingdom’s economy and economic planning?
The Saudi Credit Bureau (SIMAH) plays an important role in helping consumers, corporates and SMEs obtain financing.
SIMAH’s credit data on individuals and/or corporate borrowers provided to its members helps remove uncertainty that has traditionally been associated with lending.
The credit bureau’s accurate and timely credit information also allows financial institutions reduce risks, loan processing times, costs and default rates.
Economic theory asserts that an important impediment to an efficient credit market is the asymmetric information between lenders and borrowers and what SIMAH has put in mind since its operation in 2004.
SIMAH’s other  direct benefits to the financial and economic framework emerge from lowering information asymmetry in the credit market include less non-performing loans (NPLs), higher recovery rates, spreading-wise credit culture and raising awareness of credit rights and responsibilities and improved access to credit.
Another indirect gain is the improved performance of monetary policy, especially in times of monetary expansion in which the quality and the transmission of the policy moves smoothly in the economic channels.  
For borrowers, SIMAH’s detailed credit information and a modern credit reporting system often lead to lower interest rates, making loans more affordable and more available. SIMAH always supports wise and reasonable lending practices, and helps borrowers avoid over-indebtedness.
These benefits all combine to support broad economic growth.  
The World Bank’s (WB) Credit Depth of Information Index for Saudi Arabia for the last five years (2009-2013) is 6 out of 6.
The World Bank’s credit depth of information index measures rules affecting the scope, accessibility, and quality of credit information available through public or private credit registries.
The index ranges from 0 to 6, with higher values indicating the availability of more credit information, from either a public registry or a private bureau, to facilitate lending decisions.   
  
What challenges SIMAH faces in maintaining a sound credit system in the Kingdom?
Ten years ago, SIMAH was no more than an idea; an idea of establishing credit information bureau to collect and maintain credit information on consumers and commercials, and provide the same to members upon request.
With very few people looking after it, SIMAH was just a dream.  
Like any innovative idea, SIMAH started from zero.
Today, SIMAH provides its services to almost all sectors in Saudi market from banking, government, telecom, insurance, manpower, utilities and leasing sectors.
From the beginning SIMAH’s goal was clear; an international standard credit bureau in terms of products and services.
Concerned officials from SAMA and the International Finance Corporation (IFC) (World Bank Group) worked intensively to come up with the clear and necessary prerequisites and requirements along with the best solutions that could be adopted to overcome any potential hindrances to establish a credit bureau infrastructure.
Bearing in mind that credit bureaus are traditionally established by a group of banks, lending institutions and utility companies sharing a common interest to improve credit and risk management, the idea started to be shaped; that is, instituting a credit bureau that entails sharing customer lending data among the different entities was then the main aim.
The idea is not to take a decision on SIMAH’s members’ behalf; rather helping them to analyze their clients’ historical credit behaviors objectively and professionally, but that’s another challenge we faced and tried since then to overcome it.
Maintaining the highest technical standards, establishing a clear legal roadmap and a lack of experienced credit bureau personnel were some of the other key challenges.
For now, SIMAH provides both consumer and commercial information. SIMAH’s two joint ventures represent another success in our story.
Owned by SIMAH and Principa and established in 2012, the Dubai-based Qarar is becoming a leading credit risk and data solutions provider in the Middle East.
It delivers integrated analytic, consulting and hosted data and software solutions to serve major banks and credit providers across the Middle East in order to improve performance driven strategies and enhance profitability.
VSS (Veda@SIMAH) is the other joint venture established in 2013, which focuses on the development, enhancement and support of core credit/risk bureau operating solutions leveraging from Veda’s experience of operating the principal credit bureaus in Australia and New Zealand, and its involvement in some Asian markets as well. 
The contribution of SIMAH is clear in the Saudi market where it has contributed to the upgrading of Saudi Arabia’s rank in the Doing Business Getting Credit Index (GCI); an annual index that evaluates the ease of doing business in 183 different countries.
In 2004, GCI score was 1 out of 6 points and Saudi Arabia was ranked 38. In 2005, the GCI score increased to 2 out of 6 points while remaining at the same rank.
One year later, the score improved to 5 out of 6 points and SIMAH’s role was critical in 2008 when the GCI recorded a score the possible 6 out of 6 points along with improving the ranking of Saudi Arabia to reach 23.
Among other challenges were to diversify products and services; what might fit banking sector, for instance, may not be the same for telecom or government funds.
Another challenge was to establish and develop a national credit data-warehouse.
In 2009, SIMAH and Standard & Poor’s launched the National Data Pooling Project (NDPP).
This project comes as a crucial step in the framework of specialized projects for measuring credit risks, which will enable all participating member banks to fulfill all of Basel II & Basel III capital adequacy requirements issued in 2005.
Now, SIMAH is starting to look after the insurance market too and has established a roadmap to ensure this sector is provided the same levels of support such as the banking sector receives.  
SIMAH plays an important role in the areas of credit risk management and the promotion of a sound credit culture in the financial system and insurance sectors of the country.
A matured and developed financial sector must have effective and efficient systems to manage risk in order to sustain the insurance and financial needs of the government, industry and consumers.
The secret for our success has been diversification and adding value services.
SIMAH has become a solid credit bureau with a management team of 7 experienced executives and more than 100 employees working together as a team and with a spirit to be the first in the market and to provide innovative products and services.

How does SIMAH cooperate with local banks in their lending policies?
Cooperation with all members, including all local and forging banks operating in the Saudi market, goes in line with approved rules and regulations.
No credit services are being provided without tracing, studying and analyzing consumers’ solvency.
SIMAH’s comprehensive, data regularly updated, help all financial and non-financial institutions taking sound decisions.  
SIMAH’s diversified credit reports not only show figures of settled and/or unsettled loans, but they also provide members with accumulated payment behaviors that do not take place overnight.
A study of payment behavior conducted by SIMAH in 1,000 defaulters, shows that defaulted preliminary, secondary and high schools holders account for 4 percent and 39 percent of total defaulters respectively.
University holders account for 32 percent of total defaulters. 
The study finds that 90 percent of total defaulters are married with their wives’ incomes amounting to about SR7,000 ($ 1,866).
As per methods of payment, SIMAH’s study demonstrates that 78 percent of total defaulters pay their household expenses in cash while 5 percent of them in credit cards.
Seventy percent of total defaulters buy their house needs from hypermarkets while 30 percent from mini shops. 
The study finds out that 69 percent of defaulted tourists prefer to pay cash, and 26 percent use credit cards and 4 percent travels checks. 73 percent of defaulted tourists tend to travel abroad while their income averages SR10,755 ($2,868).   
Eighty percent of total defaulters have invested in the stock market, yet they are out of the market now. Sixty-six percent of defaulters invested directly in the stock market while 16 percent through investment funds. 
Forty-six percent of total defaulters tend to borrow from their friends to pay their bad loans while 27 percent notifies lenders of their inability to pay.
Twenty-two percent of total defaulters don’t take any serious actions.  
From health standpoint, SIMAH’s study shows that 68 percent of total defaulters don’t have health insurance while 32 percent enjoy health insurance.
Sixty-five percent of total defaulters visit government hospitals while 35 percent visit private ones. 
Regarding credit cards, SIMAH’s study illustrates that the average number of credit cards for defaulters is one per defaulter.  
Eighty percent of total defaulters own cars manufactured after 2000.
Some 36 percent of total defaulters buy their cars in cash; 31 percent in installments and 4 percent by loans.  
Forty-four percent of total defaulters are affected by banks’ promotional ads. 
All such criteria are taken into account when credit decisions are taken, though SIMAH is not involved in banks’ or non-banks’ decisions.
 
Can you outline the measures SIMAH takes to determine creditworthiness?
SIMAH’s credit report contains information regarding the borrower’s credit history, payment history, regularity of payments, credit account inquiries, national security number, contact address, and details of the credit account. There are many factors affecting credit solvency. 
The ability to borrow money comes first. The better one’s creditworthiness, the more likely it is for a bank or other financial institution to extend credit. One establishes creditworthiness by repaying loans and other bills on time, spending prudently, and generally showing that one can live in a financially responsible way.
Information and data on consumers with respect to credit transactions thereof such as loans, installment purchase, lease, credit sale and credit cards and their commitment to payment.
Other criteria include credit information reports maintained by government entities such as records of funds and banks offering government loans, judicial authorities, government committees, bankruptcy and insolvency records and the like.
 
How big is SIMAH’s database and what steps it takes to prevent hackers from accessing databases?
SIMAH now covers the whole of Saudi banking and credit market. Telecom and insurance sectors are also completely covered along with government funds.
Installments, leasing, auto, real estate and some other related sectors would be totally covered in the near future.
On the other hand, security of information comes first.
We continue to invest in the security systems we have in place to protect our clients and consumers. 
SIMAH’s systems are expected to collect and manage highly sensitive data; specific security measures need to be in place to avoid unauthorized access to the bureau databases as well as ensuring that credit information is used in full compliance with the bureau conduct code, credit information law (CIL) and implementing regulations (IR). SIMAH’s systems host a large number of security mechanisms to control and validate access rights.
Sophisticated hardware and software solutions are deployed to make sure that all operations are carried out safely.
 
How does SIMAH spread credit awareness among customers at individual and corporate levels?
Raising public awareness has remained a very important issue for SIMAH since the beginning. 
We carried out many educational initiatives and launched awareness programs directly targeting the consumers.
In 2004, there was a call center only for receiving and answering daily calls.
Now, SIMAH provides the public with all services required via its Customer Service Center.
Total number of clients visiting SIMAH’s Customer Service Center (SCSC) in 2011 was 11,112, which increased to 39,617 in 2013. 
Preliminary figures of 2014 (as of end of September) show an increase by 46 percent. Up to the mid of 2011, only males were served. In 2014, females are served too.
Female clients visiting SCSC in 2012 totaled 1,674. In 2013, the total number female clients visiting SCSC increased to more than 3,000.
Total number of calls answered was 145,857 in 2010. Total number of calls answered in 2013 went up to 223,488. 
Another SMS service was launched to raise awareness and expand credit culture.

Detailed report on
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The 510001 SMS Service, known as Your Credit On the GO, consists of three main reports —  the summary report that includes previous and last inquiries during the last 30 days, the Scorecard Report that includes the evaluation of credit solvency and customer’s financial and creditworthiness and the inquiry status which encompasses a new inquiry made by one of SIMAH members on a customer, and  a notification service, which is based on various basic alerts such as periodical update, delayed payment, bouncing checks, disputes, new products inquiry and credit limit increase alerts.
During the last two years, SIMAH sent more than 10 million educational and awareness SMS messages. ’Know Your Rights’ is a wide public awareness campaign that contributes a lot to raising awareness.
All consumers’ rights and responsibilities are explained in details in accordance with CIL and IR.
More than 70 public workshops and seminars were conducted in Makkah, Riyadh, Jeddah, Abha, Qassim and the Eastern Province during the last 4 years.
’Horizon in Credit’ is a series of an ongoing educational program providing consumers with the best ways to financial planning; effects of their credit behaviors in the lenders’ decisions, etc. 
With smartphones increasingly becoming an integral part of modern life, SIMAH has developed a mobile service yet again with the rollout of an all-new SIMAHMobile smartphone and tablet app that’s faster, more secure, more intuitive, easier to use, and filled with new location-based features, including the unique ability to trace credit updated reports, notifications and any new inquires. 
Within a few weeks from now, we would launch SIMAHMobile App as the first in the region.
The Credit, on the other hand, a specialized credit magazine issued by SIMAH and licensed by the Minister of Culture and Information, is published monthly now with a total distribution of 10,000 copies. 
In 2014, SIMAH doesn’t only provide credit report services but also it provides advisory services through specialized credit advisers.
Work is under progress to expand advisory services into the banking and financial sectors.
In November, SIMAH will be able to provide its advisory services via Real Estate Development Fund; a government fund to provide citizens with mortgage funds.
The start would be in one branch. The target will be covering all REDF’s branches in less than two years from now. 
Along with the Association of Consumer Credit Information Suppliers (ACCIS) and the Consumer Data Industry Association (CIDA), we are hosting now the 9th World Consumer Credit Reporting Conference in Dubai, where the regional and global challenges facing the credit reporting industry will be placed under the spotlight and analyzed by internationally recognized financial leaders.
 
Q: Is SIMAH coordinating with other countries in maintaining its database?
 
A: No. This is because SIMAH is licensed to collect and maintain credit information on consumers and of commercial nature, and provide the same to members within Saudi Arabia.
 
Q: Are SME projects benefiting from the Taqeem program?
 
A: Yes they are. Taqeem now is ready to be utilized by all financial firms.
In April, Bank AlJazira was the first bank to provide three SMEs with credit facilities.
Other banks are expected to come next. 
Taqeem is a credit scoring model with a tool that helps lenders reach a credit decision based on scientifically estimated variables with different weights and importance.
The Taqeem model could be used in the origination as well as the renewal of facilities.
Currently, scoring models used by banks are primarily designed for retail and corporate banking which differ from SMEs.
With Taqeem, it is expected that lenders would have better capabilities to evaluate the credit worthiness of SMEs; SMEs will be able to obtain a credit scoring certificate generated using the scoring system. Also, it will be easy to design bank-specific credit scoring models by customizing the basic model.
 
Q: Can you detail SIMAH’s modern technical complementary services to help all categories of customers?
 
A: SIMAH now has two joint ventures. First is Qarar, which is the leading specialist in data analytics and decision management solutions in the Middle East established as a joint venture between the largest Credit Bureau in the Middle East, SIMAH, and the leading analytics company, Principa. 
It is today the first credit bureau-linked analytics firm in the region and the exclusive analytics arm of SIMAH.
Qarar helps banks and credit providers protect their lending portfolios and improve customer profitability by applying proprietary credit bureau information with advanced analytics to make smarter, faster business decisions.
The other joint venture is Veda@SIMAH solution, abbreviated as VSS, a joint venture between SIMAH and leading provider of credit information and analysis in Australasia (Veda).
Our joint ventures now are working in providing added value services to the market. 
 
Q: How effective is SIMAH as the value of bounced checks dropped sharply?
 
A: The role of SIMAH in the bouncing of checks is remarkable. With the support of SAMA, there is decline in the value of the bounced checks from SR15 billion in 2009 to SR3.8 billion in 2012.
We launched the first Bouncing Check Registry System (BCRS) along with a wide awareness campaign titled ‘All Checks are Monitored’. Any bouncing check now is registered in the credit report. 
The 2010 launch of BCRS represents the cornerstone in reducing the value of bounced checks.
 
Q: How SIMAH’s two projects, SMS and IVR systems, work?
 
A: The IVR project is another success of SIMAH allowing computers to interact with humans through the use of voice and DTMF keypad inputs. Consumers, accordingly, interact with SIMAH database via a telephone keypad or by speech recognition, after which they can service their own inquiries by following the IVR dialogue.
Through this strategic project, SIMAH sets a new identify in financial sector and eliminates fraud by four basic identities — national ID number and name, and mobile number, name and voice recognition. The SMS project is going well too.
A consumer now could access his/her credit report by sending an SMS to 510001 and they would be updated on the spot.
We utilize SMS also for awareness. SMSs were sent by names to consumers highlighting the key credit issues such as financial planning, rights and responsibilities, etc.