LUSAKA/LAGOS (Reuters) - When Joyce Musonda wanted to start a business two years ago selling kitchen tiles from her backyard in an up-and-coming district of Zambia's capital of Lusaka, she braced herself for a battle to find a start-up loan.
Her predicament is common: around 80 percent of sub-Saharan adults have no bank accounts and struggle to access finance from banks reluctant to lend to new customers, especially the small entrepreneurs for whom they have no history.
Musonda's solution came from an unexpected quarter: she discovered that Zambia - wanting to encourage more middle-class business people like her - had set up a credit bureau to record her credit history and show her to be a reliable customer.
Within days, the bank had approved a $3,000 loan. Musonda now does brisk trade from the 20-foot steel container packed with Chinese-made floor tiles and roofing that sits in the yard of her freshly painted Lusaka home.
"Before the credit reference bureau I don't think I could have been granted the loan with such ease," said the 37-year-old.
Zambia's credit bureau, set up five years ago, still only has data on 12 percent of the population, according to the World Bank. The numbers are even lower, or non-existent, in other African countries.
But gradually, at the urging of the World Bank - which has introduced programs in 19 sub-Saharan countries to promote the growth of credit bureaus - Zambia and other countries are doing more.
Making more entrepreneurs visible to banks not only increases the number of loans but in turn lifts the larger economy and creates employment - the ultimate goal.
"When there's little information, then there's little financing," said Luz Maria Salamina of the International Finance Corporation (IFC), an arm of the World Bank.
"When you extend credit to a very small company or business and they expand their services, they impact society and they create jobs," added Salamina, who leads an IFC program to promote the growth of credit bureaus in sub-Saharan Africa.
Loans from banks and micro-lenders also play a major role in bringing cash-based small businesses - the so-called informal sector that isn't usually taxed - into the formal economy.
The informal sector accounts for 55 percent of the economic output in Sub-Saharan Africa and 80 percent of the labor force, according to the African Development Bank.
In Nigeria alone, home to one of the continent's biggest informal sectors, the IFC expects its credit bureau push to help create $5.1 billion in lending to small businesses in the next three years.
That's an attractive prospect for investors, and some are now stepping up for a slice of the action.
Private equity firm Actis this year took a stake in South Africa's Compuscan, which operates credit bureaus in Africa.
"In many African markets the only way to get credit is if you have some sort of physical asset that can be used as collateral, or you are a well-known person," said Frank Lenisa, a director at Compuscan.
"A credit report provides the consumer with another type of asset, what we call reputational collateral."
A side-effect of this, bankers say, is that customers now tend to pay off their debts more readily in order to protect their record.
Most African credit bureaus only provide rudimentary data, but that still helps banks size up potential borrowers.
"It helps you take a risk with your eyes wide open," said George Akello, Standard Chartered's (STAN.L) credit officer for African retail banking
On the diesel-choked streets of Nigeria's biggest city, Lagos, the reach of the informal economy is plain to see: women sell bags of drinking water and young men hawk "Nollywood" DVDs and paperback copies of "Think and Grow Rich".
With the help of more credit bureaus these street hawkers could be the next small-scale entrepreneurs, analysts say.
That said, rolling out the bureaus is easier said than done, and growth in many markets is slow.
Compuscan has had to come up with work-arounds in Uganda where there are no national ID numbers, and instead introduced biometric cards to track borrowers.
And among the banks themselves there is sometimes a reluctance to understand why sharing of their customers' credit data can make a difference to their business.
"It is still very much a cash-based economy," Compuscan's Lenisa said. "Until they actually get together and love data it's still a learning process."
Editing by Sophie Walker