World Bank defends methodology in doing business survey

By Cai Ordinario, Business Mirror, Nov 5, 2018

THE World Bank has defended its methodology, amid complaints filed by the Philippine government that the country’s Ease of Doing Business ranking did not reflect the true state of the business environment in the country.

On Wednesday last week, the Department of Trade and Industry (DTI) and Department of Finance (DOF) issued a joint statement opposing the results of the 2019 World Bank Doing Business Survey.

The results showed the Philippine declined 11 notches to 124th in the 2019 report, from 113th in the 2018 report. This was largely due to the country’s Getting Credit score, which fell to five from 30.

“The Doing Business report follows a robust methodology that is relevant, appropriate and allows for global comparability,” the World Bank Doing Business team said in an e-mail over the weekend, parrying Manila’s protest over what it described a flawed data gathering in the Getting Credit survey.

“In the case of the Philippines, the Bankers Association of the Philippines [BAP] Credit Bureau has been included in the analysis of Doing Business for the past few years.

While we are aware of the presence of other credit reporting service providers in the country, the BAP bureau fits with the parameters of the Doing Business methodology,” the team added.

The Washington-based lender explained that the Doing Business survey’s Getting Credit indicator covered the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending.

It added that the credit reporting subindicator also measured the coverage, scope and accessibility of credit information available through credit reporting service providers, such as credit bureaus or credit registries.

These credit bureaus and registries, the World Bank said, help address the challenge of providing access to financial services, including credit.

By sharing credit information, they help reduce information gaps, increase access to credit for small firms, lower interest rates, improve borrower discipline and support bank supervision and credit risk monitoring.

“This year, the Doing Business team had the opportunity to visit the Philippines to verify the data and their accuracy on the ground. The data used for the report are received directly from the credit reporting service providers and published as such,” the World Bank said.

“Doing Business will continue to monitor the credit information system in the Philippines, evaluating the status of credit reporting service providers in the country based on a rigorous application of the methodology,” it added.

In the joint statement, the DTI and DOF attributed the country’s low score on the alleged failure of the World Bank to gather correct information on the country’s credit information database.

This resulted in a substantial decrease in the credit bureau coverage to 2.7 in 2019 from 8 in 2018, and reduced scores on depth of credit information to zero from 5.

The government also said the country would have obtained a higher score if the World Bank included data from all the credit bureaus—the BAP Credit Bureau Inc., TransUnion Information Solutions Inc. and Microfinance Information Data Sharing Inc. (Midas), to name a few.

“Moreover, it is ironic that the Philippines’s Getting Credit score slumped from 30 points in the 2018 survey to only 5 points in the 2019 survey, when credit is growing year-on-year by 19 percent mostly to micro, small and medium enterprises, the highest among the Asean-5,” the DTI and DOF pointed out in their letter-protest.

The Ease of Doing Business report is a World Bank Group flagship publication and the new report is the 16th in a series of annual reports measuring the regulations that enhance business activity and those that constrain it.