CIC: Credit info database to be ready by Q1 2017

CEBU, Philippines - The state-run Credit Information Corp. is eyeing the access of the national registry of credit data to be operational by the first quarter of 2017.

In an interview yesterday, CIC President and CEO Jaime P. Garchitorena said the state-controlled firm expects to have substantial and significant data in its system by the end of this year.

He said financial institutions including commercial banks and rural banks, among others, are already in various stages in submitting data to the CIC.

The CIC has also enjoined cooperatives and microfinance firms in the shared database.

Credit data track the credit history of individuals and businesses. 

Yesterday it held a roadshow in Cebu City with medium and large-scale cooperatives the benefits of using credit information in portfolio risk management.

"Cooperatives hold a critical place in the financial ecosystem as they are one of the first touch lending institutions for many Filipinos. The on-boarding of their members to establish a personal financial footprint will give the cooperatives the credit reputation they need when their members go beyond the financial services offered by their cooperatives." Garchitorena said.

"But beyond the benefit to their borrowers, their participation in the CIC's credit information campaign is expected to alleviate common industry ailments, including non-performing loans (NPLs) and fraud, among others," the CIC official further added.

He said the shared database is a tool that can be used to protect borrowers from prejudicial lending practices that come from a lack of credible, accurate, positive and negative historical data.

For lenders, Garchitorena said, the impact to the business can be phenomenal.

"In some instances, use of credit data can reduce NPLs by up to 75 percent, increase lending amounts by up to 200 percent without significantly increasing the risk of default or over indebtedness. The resulting increase in revenues from interest and the reduction in provisioning for bad accounts will give coops greater latitude in lending more to those deserving of it," the CEO said.

For his part, Dr. Mario Lambarte, team component leader of the COMPETE project of the United States Agency for International Development, said that geater access to credit has improved the financial situation of the neighboring countries of the Philippines.

"We see big benefits for the Philippines once a credit information system is operational,” said Lambarte.

"The more people entering credit registry through submission of loan data or other relevant data sources, the greater the likelihood of being able to grant a loan," Lambarte explained.

According to Gay Santos, a senior financial sector specialist at the International Finance Corp., lending institutions must consider non-traditional collateral options to make credit for accessible to poor people. 

"Aside from parcels of land, which most Filipinos do not have, other collateral are already allowed by law since 1906, over a hundred years ago, but their use in lending sees little traction. Among other reasons, this is likely due to issues related to having an open registry of all movable asset types, priority rights and liquidation of assets should the loan fail," she explained.

Santos added: "Currently, we are assisting in the creation of a bill which seeks to harmonize technical considerations that relate to movable collateral used in secured transactions. With the eventual passage of this law which will activate alternative forms of collateral and in conjunction with the use of historical credit data of the potential borrower, we should see an expansion of the lending base to include MSME startups and greater lending at the near bottom of the pyramid."

CIC said the draft bill was submitted late last month to the office of Senator Bam Aquino.

The CIC is currently establishing a penalty structure for financial institutions that fail to submit credit data.

"We are here to help ease the issues of compliance. The System has been set up so that an authorized entity with an electronic spreadsheet and an internet connection should be able to comply without compromising data security," said Bernadette Bautista, CIC applications development head.

Republic Act 9510 or Credit Information System Act provides for the establishment of a comprehensive and centralized credit information system. The CIC is mandated to consolidate basic credit data. (FREEMAN)