CiC issues guidelines for credit bureaus

July 22, 2015 at 15:45

By Ted P. Torres (The Philippine Star) | Updated July 21, 2015 – 12:00am

MANILA, Philippines – The state-run Credit Information Corp. (CiC) will issue next month the accreditation guidelines for special accessing entities (SAEs) or credit bureaus.

The Credit Information System Act (CISA) or Republic Act 9510 defines an SAE as a duly accredited private corporation engaged primarily in the business of providing credit reports, ratings, and other similar credit information products and services.

CiC president and chief executive officer Jaime Garchitorena likewise declared that the enrollment or participation of the SAEs allows the government bureau to become fully operational by the end of the year.

“Credit bureaus are deemed essential to the proposed credit information ecosystem as these create innovative value-added products and services, such as credit scoring and analytics, using CiC’s credit database,” Garchitorena explained.

CiC had been conducting CISA orientations and technical trainings the past two years in coordination with its partner, the International Finance Corp. (IFC) – a knowledge resource on setting up credit bureaus and registries across the globe – to assist lending institutions in their compliance with the law.

Under RA 9510, lending institutions need to forward both the positive and negative credit information of their borrowers to CIC.

These institutions could similarly access the credit database or get the services of credit bureaus or SAEs to establish the creditworthiness of their borrowers.

“While the CIC will be generating credit reports that will show lenders how much a person owes, how deep their credit lines are, and how many loans from many anonymous institutions they have, the report itself will not give any opinion or analysis about the data. Lending institutions will have to infer that for themselves or they can hire a credit bureau accredited by CIC to do that for them. CIC is only a credit registry aggregating credit information, ” Garchitorena added.

Credit scoring or rating is widely used to establish the creditworthiness of borrowers in other countries and regions like Europe and the US.

An integrated credit registry allows individuals, as both borrower and depositor, to monitor and manage their own credit exposures across various institutions but it will also protect their deposits by managing the risks of lending these deposits to borrowers.

Likewise, it will increase access to credit for micro, small, and medium enterprises (MSMEs) by possibly reducing of the reliance of lenders on collateral.

The Department of Trade and Industry noted that MSMEs made up 99.58 percent, or 940,886 of the 944,897 businesses in the country in 2012.

Garchitorena reminded that improving credit access to MSMEs was part of the core policy foundation of CISA. IFC noted that globally, the total unmet need for credit by all formal and informal MSMEs in emerging markets was between $2.1 and $2.5 trillion in 2012.

“In lending, just like other businesses, time is cost. If the time required for lenders to get to know their clients is reduced, then that should translate into better service to the borrowers while opening up a bigger market and a higher quality loan portfolio for lenders. Being complete and up-to-date, we believe that credit scoring using CIC collected credit reports will be the standard in the Philippine financial market in the next few years,” he explained.

A number of local and foreign-based corporations already expressed their interest in CIC’s SAE accreditation process.

In April of this year, CIC gathered credit bureaus to orient them about the credit database project and the possible entry points for them in the business. CIC is a government-owned and -controlled corporation (GOCC) established in 2008.

It serves as a central credit registry, collecting positive and negative credit data on borrowers and providing consolidated basic credit information to individuals, businesses, financial institutions, private credit bureaus, and other entities afforded the right to the same access.



Category: Legislation News

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