CIC helps banks build up credit base at lower cost

The Credit Information Corp. (CIC) is giving financial institutions a cheaper way to build up their database of about nine million borrowers to lower investment risks and at the same time improve the access to credit for individuals as well as micro, small, and medium enterprises (MSMEs).

Jaime Casto Jose Garchitorena, president and chief executive officer at CIC, said the Philippines is considered a mature market when it comes to assessing borrowers.

“However, it may also be considered immature when it comes to using comprehensive credit data of borrowers in the lending and risk management process. This is the very reason why the CIC was created by law in 2008,” Garchitorena said.

As a way of introducing the large-scale use of credit reports to financial institutions, the Securities and Exchange Commission (SEC) granted the request of CIC for an introductory price of P10, inclusive of value added tax (VAT), until end-March next year.

Starting April 1, the commercial value of the CIC Credit Report for financial institutions shall already be set to P55.

“Even at the full price of P55, with our comprehensive gathering of credit information from the full range of lenders — from commercial banks to microfinance institutions and coops — we believe that our product is worth the money. The P10 introductory price for financial institutions is a way to lower any investment risk in using the CIC data, which some information users may consider a new entrant into the credit information delivery business,” he said.

The CIC now has close to nine million unique borrowers in its database and over 45 million contracts making it arguably the largest gathering of credit data in the Philippines.

Garchitorena explained how having so much data could improve credit access to new-to-credit individuals and MSMEs.

“The general notion is that if you have no previous credit, then you are an unacceptable risk. With large amounts of data from the CIC, the corporation’s accredited credit bureaus can help lenders develop lending and risk management model from a statistical perspective,” he said.

Garchitorena said people with previous credit exposures could get credit scores using their credit histories, while people with no credit history, could be compared to a statistically significant group of individuals with similar traits and characteristics.

“This removes the binary nature of credit history versus no credit history. With the CIC data, even individuals with no actual credit history can have some type of data-driven basis for being assessed for creditworthiness,” he said, stressing that this is a significant step for people who are unbanked or have unrecorded exposures from dealing with other sources of credit.