Proposed credit info bureau still in limbo after two years

MANILA, Philippines – The establishment of the Central Credit Information Corp. (CCIC) has remained in limbo more than two years after the passage of the Credit Information System Act (CISA) or Republic Act 9510.

The law’s implementing rules and regulations (IRR) have also been approved in May 2009 or seven months after signing into law but now, industry sources said it has not drawn as much interest as earlier forecast, or those entities that have initially signified interest might have reconsidered their positions.

Under RA 9510, the CICC will be a joint public and private effort. Government, represented by the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP), will control 60-percent equity amounting to P75 million. The SEC had been designated as CICC chair.

The private sector will account for 40 percent of the common and preferred shares, equivalent to P50 million.

“We have already committed P5 million,” Aurelio R. Montinola III, Bankers Association of the Philippines (BAP) president, said yesterday.

The Chamber of Thrift Banks (CTB), the Rural Bankers Association of the Philippines (RBAP) and the Philippine Credit Reporting Alliance (Philcrea) had likewise officially committed a minimum P5 million each.

Officials of the BAP, CTB and RBAP said they are prepared to raise their stakes if no other private sector group would be interested in making additional investments.

Qualified private investors are allowed to invest more than P5 million but not more than 10 percent each of the total value allocated for the private sector. Thus, the four private investors will have to shell out P12.5 million each.

Earlier reports indicated that the International Finance Corp. (IFC), the private investment arm of the World Bank, had expressed interest in investing in the credit information bureau. The Philippine American Life and General Insurance Co. (Philamlife) and the Philippine Life Insurance Association (PLIA), the life insurance trade organization, had also expressed interest in a centralized credit information bureau.

A credit information bureau is an entity that will maintain a credit history database of individuals and companies. The facility will help banks, non-bank financial institutions, credit card companies, insurance companies, and other financial institutions to determine the credit-worthiness of their borrowers more efficiently.

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 will 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 central bank said.

A study conducted by the World Bank states 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 will 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, will increase efficiency of banks in processing loan applications by 43 percent while default rate could drop significantly to only two percent. –Ted P. Torres (The Philippine Star)