PMA aims for better credit allocation with upgraded scoring system

After a number of year of cooperation, Creditinfo have developed a new version of the Scoring Model for PMA.

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Palestine Monetary Authority rolls out latest version of its credit scoring system; new categories and adjusted variables designed to improve credit allocation

The Palestine Monetary Authority (PMA) has launched a new version of its credit scoring system in an effort to better channel credit to the sectors of the economy it views as most important.

Now in its fourth version, the system calculates credit scores and gives banks and other lenders access to the information to support their lending decisions.

The latest upgrade divides borrowers into individuals and institutions, using a different set of variables to calculate the credit risk of each group.

The variables themselves have also been tweaked, with the aim of favouring credit allocated towards “productive” lending rather than consumer loans.

Ali Faroun, director of the PMA’s market conduct department, says the PMA regularly reassesses the variables to support its policy priorities, working in coordination with CreditInfo, an Icelandic company that supplied the system.

“Based on the assessment results and the banking system’s needs, we adjust the variables of the score card to comply with the needs and PMA policy,” he says.

The scores are also linked with what the PMA calls a “dynamic loan-to-value (LTV) ratio”, meaning consumers with higher scores have access to higher LTV mortgages.

As well as helping to direct credit to the parts of the economy the PMA wants it to go, the system supports the central bank’s financial inclusion agenda and helps it oversee the spread of credit risk throughout the economy.

As former governor Jihad Al-Wazir told Central Banking in an interview in November 2015, the credit scores help women and marginalised groups to obtain credit by giving banks concrete evidence of their creditworthiness.

It also allows the PMA to see at a glance how risks are developing in the economy, and contain them. Between the system’s launch in 2010 and 2015, Palestine’s loan-to-deposit ratio rose from 28% to 57%, and non-performing loans fell from 15.3% to 2.5%.

In a report published on June 6, the PMA said the banking sector delivered a good performance during Q4 2015, even though growth was slowing in both Gaza and the West Bank. Credit grew at 19.1% year-on-year, compared with GDP growth in Palestine as a whole of 6.1%.

Faroun says the PMA has plans for a few other systems, which it hopes to launch before the end of 2016, including a new handling system for credit reports and upgrades to bounced/stopped cheque systems.


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