Commercial banks offer credit bureau services to rural banks

MANILA, Philippines - In the absence of the national credit information system as mandated by the Credit Information System Act (CISA), rural banks are encouraged to avail of the credit information services offered by the Bankers Association of the Philippines-Credit Bureau Inc. (BAP-CB).

The CISA was passed into law in October 2008 and the implementing rules and regulations (IRR) were finalized the following year.

Under the law, the credit information body is mandated to receive and consolidate basic credit data and to act as a central registry of credit information. It will provide access to reliable standardized information on the credit history and financial condition of borrowers.

However, it all remains in paper as the Securities and Exchange Commission (SEC), designated by the law as lead government agency, has not taken any action since the approval of the IRR.

For the meantime, poor information on the credit worthiness of borrowers could lead to more bad loans and fraud.

But in a forum organized by the Rural Bankers Association of the Philippines (RBAP), BAP, the trade organization of the commercial banking system, categorically offered its services.

BAP-CB officer Manuel Batallones offered its information system to support rural banks’ credit information needs as their way of supporting the rural banks and especially the microfinance sector. 

In fact, Batallones revealed that they have reduced the fee for inquiry from P11 to P5.60 and waived the fee to join the system. In fact, 20 rural banks have already subscribed to the bureau.

RBAP president Corazon Miller said that the bureau is an important tool for rural banks to use in processing loans as well as screening new checking account applications as it provides information whether they have credit cards cancelled, checks bounced, mortgaged (properties) repossessed, or loans in litigation, in the absence of a national credit information bureau.

Rural banks can help avoid lending to borrowers with existing loans in other banks and, thus, potentially avert client over-indebtedness. Multiple borrowings and over indebtedness are harmful to microfinance clients, and are now viewed as potential threats to the sector due to stronger competition amongst rural banks and other microfinance players.

Miller, who is also president of First Country Bank of Taguig, admitted that her rural bank had been able to get payments from delinquent clients whose names had been submitted to the BAP-run bureau.

The BAP-CB database contains more than 3.8 million accounts with negative information (such as unpaid loans, loans under litigation, bouncing check cases, and mishandled credit cards). Commercial banks have been using this tool as part of their screening process for all borrowers.