The First Credit Bureau

Abstract

This case can be used in courses on credit markets, emerging markets finance, and economic and financial development. The Pragma Corporation, a northern Virginia-based international development consulting firm, won a bid put out in 2001 by the United States Agency for International Development (USAID) to help develop a credit bureau in Kazakhstan. Between 2001 and 2003, Javier Piedra, a senior consultant at Pragma, and a team of four local consultants assessed the market opportunity, prepared a business plan, and made the case to senior Kazakhstani government and private-sector officials that it was possible to develop a well-functioning private credit bureau based on international best practices. Key stakeholders accepted much of FSI's theoretical argument, but it was not clear that the financial community was willing to transfer their proprietary data, perhaps their most important asset to a credit bureau. To move forward, Piedra and his team had to negotiate with various stakeholders around two complex issues--the ownership and governance structure for the credit bureau and a legal framework for sharing credit data--and persuade a majority of the banks to share their data. The case gives detailed information on the credit bureau's business plan.

Excerpt

UVA-F-1524

The First Credit Bureau

Javier Piedra was anxious. Piedra was a senior consultant in the Financial Sector Initiative (FSI) of The Pragma Corporation. Pragma, a northern Virginia–based international development consulting firm, had won a bid put out in 2001 by the United States Agency for International Development (USAID) to help develop a credit bureau in Kazakhstan. Piedra and a team of four local consultants had spent the last two years assessing the market opportunity, preparing a business plan, and making the case to senior Kazakhstani government and private-sector officials that it was possible to develop a well-functioning private credit bureau based on international best practices. Key stakeholders accepted much of FSI's theoretical argument but it was not clear that the financial community was willing to transfer their proprietary data, perhaps their most important asset to a credit bureau.

A Country in Transition

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Keywords: credit bureau markets emerging information asymmetry, Kazakhstan