Government urged to start operating Phl credit bureau

MANILA, Philippines - Sen. Edgardo Angara is urging the government to start operating the Philippine credit bureau to further strengthen the country’s capital markets and at the same time unlock much needed financing for small entrepreneurs, farmers, and consumers.

Angara said in his speech during the 30th National Credit Congress organized by the Credit Management Association of the Philippines that the Credit Card Information Corp. (CICC) is yet to be fully functional more than two years after the enactment of Republic Act 9510 also known as the Credit Information System Act (CISA) of 2008.

“I hope the government realizes the urgency to finally implement this important law which will certainly strengthen our capital markets,” he stressed.

He pointed out that the government has yet to name the president of CICC despite the fact that the Bangko Sentral ng Pilipinas (BSP) has issued the implementing rules and identified the members of the board last year.

The CICC is supposed to be 60 percent controlled by the National Government and 40 percent owned by qualified investors such as industry associations of

banks, quasi-banks, other credit related associations and associations of consumers is tasked to receive and consolidate basic credit data.

It is tasked to gather and consolidate credit information from banks, credit card companies and government financial institutions into a centralized databank that would serve as a common storehouse which both consumers and financial institutions could access to facilitate smoother credit transactions.

“Millions of Filipino employees and entrepreneurs experience difficulty in obtaining credit because banks are rightfully wary of their lack of credit history. As a result, high interest rates are imposed on them to compensate for perceived high risks,” Angara lamented.

Angara explained that credit is badly needed to spur growth in the countryside.

“Microfinance, micro-agri loans, micro-insurance – these are the emerging needs in our countryside. When we push for inclusive growth, we also have to advocate for inclusive finance to ensure that our rural folks also cash in on the benefits of progress,” he added.

The BSP had said that if banks had a better grasp of the credit-worthiness of borrowers, those who have maintained clean credit records may get charged lower interest rates and, therefore, be encouraged to borrow. In the same light, those with poor credit records would either be penalized with a higher premium risk.

“A credit bureau will help banks price risk better. The cost of doing business will also be rationalized in the process,” the BSP said earlier.

A study conducted by the World Bank stated that the establishment of the credit bureau would help increase the probability of small firms to access financing from 28 percent without a credit bureau to 40 percent.

It would also reduce financing constraints for small firms. Under the existing environment, only 27 percent of small firm are without constraints in obtaining borrowed funds. This number is projected to improve to 49 percent.

Sharing credit information, likewise, would increase efficiency of banks in processing loan applications by 43 percent while default rate could drop significantly to only two percent.