Information, cornerstone of a vibrant economy
Credit is a form of empowerment. It forms a part of a person’s financial muscle. When used wisely, credit plays an important role in forming a sound financial record. Establishing a line of credit — one of the easiest ways of which is to obtain a credit card — means that the bank or lender trusts and believes that the borrower has the goodwill and capacity to repay a loan or financial obligation. For the borrower, a trustworthy credit record is the ultimate vote of confidence. For the lenders, tapping customers with good credit history means that future transactions are likely to be easier and hassle-free.
Birth of the CIC
Many developed countries foster mechanisms that collect and store a person’s credit record. Having a central repository of credit information is a common feature in many highly developed economies and emerging markets. Here in the Philippines, the Credit Information Corporation ( CIC) was created in 2008 by virtue of the Credit Information System Act ( Republic Act. No. 9510). The CIC aims to be the leading provider of comprehensive, independent, reliable and accurate credit information through the efficient collection of credit data and the use of state- of- theart technology and facilities.
According to the law, the CIC maintains three primary functions: to receive and consolidate basic credit data; to act as a central registry or repository of credit information; and to provide access to reliable, standardized information on credit history and financial condition of borrowers.
Kee per of reliable credit information
“The CIC was created due to the lack of a centralized database of credit information in the Philippines and there was no one regulating the accuracy of credit data, resulting to our financial institutions’ exposure to higher risk and increased non- performing loan portfolios. Hence, there was a need to provide access to reliable, standardized information on credit history and financial condition of borrowers,” says CIC president and CEO Jaime Garchitorena.
Garchitorena explains how this credit information system is built. “The CIC is collecting the needed records through online submission. We have been going around the country for a nationwide educational campaign on legal, technical and compliance workshops. We also provided deadlines for the financial institutions which are required under the law to submit data to the CIC, which includes banks, quasi-banks, their subsidiaries and affiliates, life insurance companies, credit card companies, GOCCs engaged in lending, financing companies, and cooperatives. The CIC also issued a circular mandating all the telephone companies in the Philippines to submit the basic credit data of their subscribers to the CIC. For those who are willfully not submitting data to the
CIC, corresponding sanctions will be imposed in accordance with what the law prescribes,” he discusses.
Driving the economy forward
Credit is one of the main drivers of the economy. As an economic indicator, the growing demand for credit means that the general economic environment is favorable and customers are more willing to spend. Almost always,
increased credit activity leads to increase in spending, which results to higher GDP ( gross domestic product) and faster productivity growth.
For lending entities — especially those who engage in banking, finance and credit — an efficiently operating credit information bureau system is a catalyst that will definitely contribute to a healthier and more stable financial system. Adequate c redit information could facilitate lenders in screening and monitoring borrowers as well as avoiding giving loans to high-risk individuals.
The CIC chief elaborates, “There is a need for financial institutions to participate in building the Credit Information System because this is an accessible and inexpensive tool that would aid them in coming up with better lending decisions. This would lessen, if not completely eliminate, their nonperforming loan portfolios. A complete credit information will make them create a meaningful assessment of the creditworthiness of the person to whom they are lending because they will now have a factual and objective overview of the credit history and track record of their borrowers.”
Through the CIC, the benefits of a comprehensive, centralized and reliable credit information system could be fully realized. These benefits include expediting the processing time of loans rather than the long, tedious, and costly process of credit investigation, lowering interest rates and reducing excessive dependence on collateral to secure credit facilities. This will also provide the availability of larger loan amounts, including improvement of the overall availability of credit to micro, small and medium enterprises (MSMEs).
CCAP and CIC: Goaldriven partners
As the professional organization that links the credit card industry, merchant establishments, and most importantly, the consumer, the CCAP is in a unique position to efficiently and effectively collect and provide accurate credit data and pass this on to the CIC to build a reliable and comprehensive centralized credit information system.
“CCAP, being one of the stockholders of the CIC and having a seat in CIC’s Board of Directors, serves as an instrument conveying to the CIC the concerns and needs of the credit card industry. It also acts as a medium promoting the necessity of establishing good payment behavior among consumers. It works closely with the CIC to promote compliance of its members to the CIC. Through CIC, all information of the credit card customers will be updated regularly, thus eliminating blacklisting or negative listing. For the CIC, gathering of data from all the sectors required to submit credit information is still on-going. We will continuously do technical and compliance workshops and monitor the quality and submission of data taking into consideration the great number of lenders and financial institutions providing credit facilities in the Philippines. By 2017, we would be able to allow access of those who already submitted data,” Garchitorena shares.
The strength of a comprehensive, centralized and reliable credit information system lies on accurate and comprehensive data on an individuals’ borrowing and billpaying habits. When utilized properly, this wealth of information will open many opportunities and create more favorable conditions for both borrowers and lenders alike. As mandated by law, the CIC is the trusted keeper of these records — steadfastly ensuring that creditors have the records they need to make well-informed decisions.