ONCE the national credit information system starts running, the country’s credit industry is expected to be given a boost, a consumer lender from the Czech Republic who has business in the Philippines said.
David Minol, president and chief executive officer of Home Credit Philippines, said the creation of the credit bureau will be a “game changer” for the country’s credit industry, which remains largely untapped by most Filipinos, as this is expected to serve more borrowers, especially the first timers.
“This (credit bureau) is helpful for people who do not have any credit history. It will help them build a credit history,” Minol said during the press conference for the recent launching of Home Credit Philippines in Cebu, its first expansion outside Luzon.
Through Republic Act No. 9510 or the Credit Information System Act (CISA), a comprehensive and centralized credit information system in the Philippines was established and called the Credit Information Corp. (CIC), a government-owned and controlled corporation. It is envisioned to be the leading provider of “independent, reliable and accurate” credit information.
In October 2015, CIC published in a circular calling all banks and non-bank institutions to submit their credit data in 2016.
As of December 2015, CIC received credit data from six financial institutions.
Institutions that do not submit their will be subject to appropriate penalties. Submission of incorrect data will also be faced with sanctions.
Minol said banks and lending companies would have to submit credit data of their clients, whether these are positive or negative. Good credit scores will result in faster approval of loan applications, potentially lessen the collateral requirement and help manage the risk of default.
A study from the Asian Development Bank Institute (ADBI) in January 2015 showed that small and medium enterprises in the Philippines still can’t rely on banks in the expansion of their businesses.
A working paper titled “Why Do SMEs Not Borrow More from Banks? Evidence from the People’s Republic of China and Southeast Asia,” found that over 70 perent of the funds used by SMEs in the Philippines were internally generated. It attributed this to low bank exposure to a lower level of capital market development, underdeveloped SME financing institutions, and the “asymmetric” information between SME lenders and borrowers.