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Wednesday, June 14, 2006
Credit agency to benefit small traders
SENATOR Edgardo Angara said the Senate's enactment of a bill establishing a Credit Information Corporation will foster credit approval, specifically to small businessmen.
"The greatest benefit of the credit corporation is making credit more available, especially to small yet responsible borrowers. Their good track record in paying their obligations will be known to financial institutions and will thus make it easier for them to borrow," said Angara, who chairs the Senate committee on banks and financial institutions.
Angara noted that only P43 billion has actually been provided by banks and other financial institutions as loan although there are hundreds of billions of pesos available for micro-lending as learned in a recent meeting of microfinance.
"This is because there is a lack of comprehensive and credible credit-related information. Lenders would have to gather vast amounts of information in order to asses a person's creditworthiness, which is both difficult and costly," Angara said.
Because of this, the senator noted that lenders are exposed to high credit risk, while borrowers are having a hard time to acquire a loan as they are required to present valuable physical collateral. Borrowers are also forced to pay high interest rates.
"Credit becomes costly, if not completely inaccessible. This leaves small borrowers- the masses, starting entrepreneurs and small-scale businessmen - at the mercy of loan sharks," Angara added.
With the creation of the Credit Information Corporation, creditors and borrowers will be both protected and provided with information to make their transaction easy.
The corporation's main task is to gather credit information from financial institutions such as banks, credit card companies and government lending institutions. Information about borrowers will also be obtained.
"Not only will it lower the cost of credit and reduce reliance on physical collateral to secure credit facilities but it will also give lending institutions access to accurate and reliable credit information to help them manage credit risks better," Angara said. (REC/Sunnex)
(June 14, 2006 issue)
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