Unmasking the Shadows behind Ghana’s Veep’s “Phones on Credit” Bonanza
The recent Gen Z protests in Kenya have thrown into sharp relief the frustrations of the poor, jobless, youth of Africa.
As Ghana goes to the polls this December to elect a new President, the ruling party’s candidate, the sitting Vice President (Veep), has his own goodies for the youth: mobile phones.
80% of the youth may have access to smartphones, but many low-income ones do not. The Veep says all they need is a credit score & phones shall be theirs.
His claims have generated a firestorm of controversy about feasibility. But there’s a far more interesting subtext about the interplay between politics and business.
1. A credit scoring system is a software algorithm that reduces credit reports into single numbers for an individual or business, helping lenders predict a borrower’s likelihood to pay back or service debts.
2. Ghana’s first credit bureau was set up in 2003. Today there are two credit bureaus – XDS and D&B – after a third – Hudson – collapsed due to financial issues.
3. In 2022, 15 million plus Ghanaians had credit reports (even if they didn’t know about it) as their data has been captured by XDS and D&B. That’s virtually 100% of the economically active population.
4. XDS has operations in other African countries like Nigeria and South Africa where it is able to generate credit scores from credit reports. D&B has operations all over the world. Both companies thus have access to software algorithms to generate credit scores for Ghanaians.
5. Both XDS and D&B also already use the Ghana Card to ensure that credit history information about individuals coming from multiple sources (banks and other creditors) is consistent.
6. It has nonetheless been challenging for XDS and D&B to generate credit scores for all Ghanaians due to thin data (many people simply don’t have enough of a credit history), poor data quality, and poor enforcement of credit reporting laws. This is, of course, not a problem unique to Ghana. In India, roughly 78% of the population do not have credit scores.
7. It also bears mentioning that “credit scoring” is just one specific approach, originating from the United States, to addressing debt defaults. China has never had a traditional credit scoring system (it is working on a completely different approach). In France, privacy concerns prevent the use of credit scores. Japan also does not follow the credit scoring approach.
8. If Ghana’s Veep REALLY BELIEVES that credit scoring is what will make cheap phones for low-income youth possible, why is he not working to address the issues in the current system so that low-income youth can all be issued with credit scores, armed with which they can qualify for phones on cheap credit?
9. It turns out that close associates of the Veep have business interests which conflict with this obvious way forward. They have set up a new credit bureau, MyCredit Score Ltd, got a provisional license from the Bank of Ghana, and don’t want to compete on a level playing field with the existing credit bureaus.
10. MyCredit Score’s politically backed owners have powerful fintech and related businesses that, intertwined with a presidentially backed credit bureau and the digital surveillance capabilities of a national ID system, will give them greater control of Ghana’s digital finance landscape.
As they say, ALWAYS follow the money.😊
