Credit Reporting Systems and the International Economy
465 pp., 6 x 9 in, 25 illus.
- Published: February 28, 2003
The first comprehensive review of credit reporting systems worldwide, including their institutional forms and evidence of their impact on financial markets.
Credit reporting is a critical part of the financial system in most developed economies but is often weak or absent in developing countries. It addresses a fundamental problem of credit markets: asymmetric information between borrowers and lenders that can lead to adverse selection and moral hazard. The heart of a credit report is the record it provides of an individual's or a firm's payment history, which enables lenders to evaluate credit risk more accurately and lower loan processing time and costs. Credit reports also strengthen borrower discipline, since nonpayment with one institution results in sanctions with others. This book provides the first comprehensive review of credit reporting systems worldwide and documents the rapid growth in the industry. It offers empirical and theoretical evidence of the impact of credit reporting on financial markets, using examples from both developed and developing economies. Credit reporting, it shows, significantly contributes to predicting default risk of potential borrowers, which promotes increased lending activity. The book also covers the role of public policy in the development of credit reporting initiatives, including the role of public credit registries managed by central banks; and the role of legal, regulatory, and institutional factors in supporting credit reporting.
While 'credit culture' is one of those financial-market fundamentals that is hard to define, and harder to strengthen where it is deficient, there can be little doubt that credit-reporting systems are an essential ingredient in building a stronger credit culture. Margaret Miller's book is a fascinating introduction to a multifaceted topic, providing historical, legal and policy perspectives from Europe, the United States, and Latin America. The book will be useful to the research community as well as to policymakers seeking lessons from other countries' experiences on how credit-reporting systems have been built and utilized.
Michael Gavin, Head of Latin America Research, UBS Warburg
Margaret Miller's Credit Reporting Systems and the International Economy is the definitive work on the role personal data history plays in fueling a consumer credit economy in the world.
Barry Connelly, President, Consumer Data Industry Association