A centralized credit information system is seen to be up and running in the Philippines by 2015 under the state-backed Credit Information Corp., which sealed a crucial technology platform deal to jumpstart this much-awaited infrastructure needed to rationalize local debt market processes.
CIC president Jaime Garchitorena told reporters during a ceremonial signing with technology solution providers CRIF and Total Information Management (TIM) on Monday that the company was targeting to collect the bulk of data mandated to be submitted to CIC by end-2015.
“We’ve engaged the banks and sent them a questionnaire which deals with what form the data will take. This is primarily for the submission aspect. Once we get that, CRIF will fine-tune the customizable layer of the solution and we should have a prototype running ready to accept sample data in six months. From that point, we then start improving on the system until about mid-2015 when we should be able to take on full contributions from all the required financial institutions,” Garchitorena said.
Soft launch
From initiating “soft” operations in mid-2015, he said CIC was hoping to end next year with over 80 percent of required data already pooled in its database, during which the centralized credit system should have some “level of usability.”
CRIF, which is based in Bologna, Italy, bagged the contract to be CIC’s technical provider in partnership with local system integrator TIM, which in turn will provide the technology platform and operational support for two years from initial project implementation.
CRIF is a global solutions provider operating in four continents and supporting more than 3,100 banks and financial institutions as well as 25,000 companies.
According to the CIC, the CRIF-led team was selected for this project on the basis of its track record in the design, development and management of credit bureaus worldwide, such as in Vietnam, Indonesia, India, Bangladesh, Russia, Tajikistan, Italy, Czech and Slovak Republics, Jamaica, Morocco, and Benin.
The CIC will keep credit history under a mandated three-year horizon, except for bad credit, Garchitorena said.
“As soon as the bad credit is repaired then it is removed from a three-year view but then it’s archived, and we can go as far back as necessary,” he said.
Under the system, the borrower can have access to his credit history once a year and have the ability to dispute data, especially if there were debt settlements yet to be reflected.
While the data would initially be collected from banks, the CIC is likewise in talks with other institutions like housing lender Pag-Ibig (Home Development Mutual Fund) and pension fund Social Security System to likewise contribute data.
Data contributors
Eventually, CIC would likewise want utility operators like Manila Electric Co. or Philippine Long Distance Telephone Co. to become data contributors in exchange for access to data. Garchitorena said data from utilities would be crucial to help people who did not yet have credit records in the banking channels.
The upcoming centralized credit information system is seen to allow local entrepreneurs and small and medium enterprises to use their credit score to attract lenders. Lenders can, in turn, access “accurate, timely, objective, reliable and comprehensive” credit information.
This system is necessary for the Philippines to be able to seize opportunities from the upcoming 2015 economic integration of the Association of Southeast Asian Nations (Asean).
“The Asean integration is expected to pave the way for the free movement of skilled labor and business ventures across borders. Accurate credit information will enable entrepreneurs and businesses to quickly financially integrate into their new environments as they find available credit based on their credit history in the Philippines,” Garchitorena said, adding that CIC would play a significant role in providing this information in a reciprocal manner with credit bureaus in the Asean.
Stakeholders
The CIC is 60-percent owned by the government and 40-percent owned by the private sector composed of the following: Philippine Cooperative Center, Bankers Association of the Philippines, Credit Card Association of the Philippines, Chamber of Thrift Banks, Rural Bankers Association of the Philippines and the Philippine Credit Reporting Alliance.
The credit information system project is undertaken by the CIC in accordance with its mandate under Republic Act 9510 (Credit Information System Act). The project is backed by the International Finance Corp., in an advisory capacity, in partnership with the Swiss State Secretariat for Economic Affairs and the Department of Foreign Affairs, Trade and Development of Canada as well as Japan’s Ministry of Finance.
While the project aim to draw up a business model that seeks profitability, Garchitorena said this is a necessary piece of capital market infrastructure, which the government is expected to support financially until operations have been stabilized.
The law also mandates that the system be privatized in five years. Based on the reckoning period of when CIC’s first board meeting took place, the privatization is targeted by 2016.