Publication | Closed Access
Credit reporting systems and the international economy
245
Citations
0
References
2003
Year
Credit reporting is essential in developed economies, weak in developing ones, and mitigates asymmetric information by providing payment histories that enable lenders to assess risk, reduce processing time, and enforce borrower discipline. The book reviews credit reporting systems worldwide, documents rapid industry growth, and presents empirical and theoretical evidence of their impact on financial markets. It examines how public policy, central‑bank‑managed credit registries, and legal, regulatory, and institutional factors shape credit reporting initiatives. Credit reporting markedly improves default‑risk prediction and thereby boosts lending activity.
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.