Central Credit Information Corp. to start operations in Q3

MANILA, Philippines - The Central Credit Information Corp. (CCIC) is expected to start operations by the third quarter of 2010.

Chamber of Thrift Banks (CTB) president Pascual Garcia III said the formation of the bureau would make access to credit easier.

“It will speed up delays in the release of loans that previously relied on information on the borrower,” Garcia said during the general membership meeting of the trade association of the country’s thrift banking system.

The CCIC will be the country’s first credit information bureau that is expected to pave the way to faster processing of loans or claims as it centralizes, in a database, the credit history of individuals and companies.

The bureau will help all types of banks, non-bank financial institutions, credit card companies, insurance companies, and other financial institutions to determine the credit worthiness of borrowers more efficiently.

The Bangko Sentral ng Pilipinas (BSP) had said that if banks had a better grasp of the credit worthiness of borrowers, those who have maintained clean credit records may be charged with lower interest rates and, therefore, be encouraged to borrow.

However, borrowers with poor credit records would either be penalized with a higher premium risk or “the door will be shut in their faces.”

“A credit bureau will help banks price risk better. The cost of doing business will also be rationalized in the process,” BSP Deputy Governor Nestor Espenilla Jr. said in an earlier interview.

Under Republic Act 9510 or “the Act establishing the credit information system, and other purposes,” the CICC will be a joint public and private effort.

The Securities and Exchange Commission (SEC) and the BSP would represent the government that will control 60 percent equity amounting to P75 million. The SEC chief would be designated as CICC chair.

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

The Bankers Association of the Philippines (BAP), the Rural Bankers Association of the Philippines (RBAP), the Credit Card Association of the Philippines (CCAP), and the Philippine Credit Reporting Alliance (Philcrea) had likewise officially made individual commitments amounting to a minimum P5 million each.

The International Finance Corp. (IFC), the Philippine Life Insurance Association (PLIA) and the Philippine American Life and General Insurance Co. (Philamlife) had also expressed interest in the credit bureau.

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.