Distributors advised to share credit information

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Zaid Kamhawi believes a more collaborative effort is needed to improve market transparency.

IT distributors could reduce their chances of suffering credit losses by becoming more open with sharing customer payment behaviour, according to the UAE’s first credit information bureau Emcredit.

The Dubai-based firm, which collates information on the repayment habits of individuals and companies to help lenders make credit decisions, reckons the time has come for distributors to take a more scientific approach to credit management.

Uncertain economic conditions have led to higher levels of defaults in trade credit payments this year, causing a decline in confidence levels and creating a risk-averse businesses environment. The IT market has been one of the most affected as channel companies have struggled to meet payment obligations.

As a result, Emcredit has begun exploring new information sharing platforms to make it easier for companies to size up the risk profile of their existing customer portfolio and identify prospective customers that they would be willing to do business with.

“Our new initiative to develop a platform for companies to share their credit experiences will help distributors know their customers’ total credit exposure, average collection period and history of payment defaults,” explained Mohamad Jomaa, commercial business development manager at Emcredit.

“It will help reduce payment delinquencies in the channel, enabling distributors to allocate their risks and predict their payments more accurately. This initiative also helps distributors reduce operational costs in two ways — firstly by reducing the manpower time invested in informal credit investigations and secondly by reducing credit approval processing time,” added Jomaa.

Emcredit claims it is able to offer the legal infrastructure, back-end systems and data handling expertise that informal credit circles lack, meaning channel players can benefit from sharing information without compromising their competitiveness.

Zaid Kamhawi, chief business officer at Emcredit, insists information sharing can help reduce the damage that is done to connecting tiers of the value chain when a default occurs.

“You need to ease these bottlenecks by providing information, building confidence and allowing businesses to start extending credit to their business partners again,” said Kamhawi. “This is the right time to engage in such a collaborative effort and I think that is evident by the interest we have been receiving. The overall benefits of such an effort far exceed any kind of reservations a company might have about sharing information or working in a silo. This is why it has been repeatedly proven that coming together outweighs any sort of benefit of companies working alone.”

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