K192.5 million Savenda Management Services Court Award Against Stanbic Bank

Court of Appealt Decision

By Derrick Sinjela

In August 2016, Judge Justin Chashi awarded damages to Savenda Management Services amounting to K192.5 million Kwacha. This paper will publish a ten part feature series based on researched positions on the significance and impact of Credit Reference Bureaus (CRB) on access to loans and also the role of banks in economic development.

Let me begin by defining a CRB. What is a Credit Reference Bureau (CRB) and what does it do? Well a Credit Reference Bureau is a collection agency that gathers account information ideally from various creditors and provides that information for purposes of credit rating and a basis for accessing loans.

There are a host of advantages for the need of a CRB.

These include timely and accurate information on a borrower’s profile and their repayment history.Banking experience has shown based on research that when financial institutions compete with each other for customers, multiple borrowing and over indebtedness increases, spiking the risk of loan delinquency.

To mitigate this, CRBs play an important role in loan disbursement risk management based on customer/client profiling. CRBs therefore reduce the cost of screening loan applications by enabling the lender to sort out prospective borrowers who have defaulted with other lenders. Through this process the CRB provides a platform for improving risk default prediction.

Clearly, from this definition, and the roles that CRBs perform in loan access, one cannot miss the obvious, that CRBs determine whether one can access a loan or not. This is a vetting platform which determines whether a loan is approved or not.

Who has the mandate of placing a client or customer on the CRB, clearly it is the credit provider. The question begs if so much reliance is placed on CRBs for access to finance, inevitably much caution must be employed before a client or customer is placed on a CRB listing.

High Court of Zambia

For a minute, image that a credit provider mistakenly or negligently or maliciously places a client/customer or business on a CRB? What do you think would happen? Clearly you are killing development and slowing business innovation, enterprise and development.Banks must employ prudential caution before a client or customer is listed on the CRB. Our view is that  Judge Justin Chashi sufficiently applied his mind in arriving at this award to Savenda Management Services in the sum amount of K192.5million.

Part one: Look out for Part two