The Securities and Exchange Commission has teamed up with state-owned Credit Information Corp. (CIC), the country’s sole public credit registry, to curb informal lending and improve financial inclusion by harnessing basic credit data to improve credit access.
The SEC recently held a four-day forum to discuss requirements for compliance with Republic Act No. 9510, or the Credit Information System Act (Cisa). It was attended by 211 financing and lending firms and 254 individuals.
The forum was aimed at promoting the use of CIC’s database of credit information to improve the speed, security and profitability of business while complying with the law, the SEC said.
SEC memorandum circular No. 3 of 2016 requires financing and lending companies to submit the basic credit data of all their borrowers to the CIC.
Created in 2008 following the legislation of Cisa, CIC is mandated to establish a comprehensive and centralized credit information system for the collection and dissemination of fair and accurate information relevant to, or arising from, credit and credit-related activities of all entities participating in the ecosystem. To date, the CIC has seven million data subjects and some 30 million contracts in its database.
The demographics portion of CIC’s data enables “rapid and accurate know-your-client (KYC) and identity confirmation” while the transactional portions —which record positive and negative payment behavior—provide statistical data that can improve the granting of credit to new borrowers, the SEC said.
At the forum, CIC president and CEO Jaime Garchitorena said that while accessing the CIC database was pitched as a business tool for those who were qualified to access it, submission was mandatory.
As a regulator of credit information, CIC will come out with a list of institutions that comply with data submission requirements. Apart from supporting compliant entities, CIC seeks to boost consumer protection by making known to the public a list of institutions that use credit data in their loan evaluation process.
Within the next 18 months, CIC expects to bring onboard microfinance and government-owned and -controlled (GOCC) data, making its database representative of the greater population with access to credit. However, access to CIC’s database is based on the principle of reciprocity.
The legal and regulatory framework of the CIC was also discussed during the forum. CIC’s public credit registry was cited as a tool in improving financial inclusion and access to credit.
As part of the orientation on data driven lending, two of the accredited credit bureaus of CIC, namely, CIBI Information Inc. and CRIF Corp., developed usage models using the CIC data. They presented their analyses on the CIC data’s usability and predictive nature.
Presented during the forum were case studies showing improvements in the onboarding of borrowers who had otherwise been rejected while still improving default rates. The database was also seen to map areas of credit concentration and high-default areas while maintaining a high level of compliance to data privacy principles.
The concept of individual credit scores was also tackled as a critical part of data usage roadmap. The use of credit scores derived from CIC credit is seen to lower cost of lending by by matching the borrower, or data subject, with an appropriate financial institution.