Credit bureau for microfinance formed

MANILA, Philippines—A credit bureau dedicated for micro-borrowers has been formed, and the Bangko Sentral ng Pilipinas said this should help boost growth in lending to the country’s low-income sector to a double-digit pace in 2012.

The seven biggest micro-finance institutions in the country signed on Tuesday a memorandum of agreement on the creation of the credit bureau, which would make lenders more comfortable at extending loans to micro-entrepreneurs.

Under the “Microfinance Data Sharing System (MiDAS)” agreed upon by the seven institutions, credit information on micro-borrowers would be placed in a common database that the lenders would have common access to.

Proponents of the system said that with the credit bureau, micro-entrepreneurs of good credit standing or those that have not been heavily indebted would have better chances of securing loans from the participating creditors. They said the credit bureau would address the problem of difficulty in access to loans by perceivably credit-risky micro-borrowers.

The seven micro-finance institutions that are signatory to the MiDAS are the following: Taytay sa Kausagan Inc. (TSKI), OK Bank, CARD Bank, CARD NGO, Negros Women, Ahon sa Hirap and ASA Philippines. Together, they serve about 70 percent of the estimated 1 million micro-borrowers in the country.

Aristotle Alip, managing director of the CARD MRI Development Institute – the umbrella organization for some microfinance institutions including CARD Bank – said other entities engaged in micro-finance would be welcome to be part of the credit bureau.

Alip said that unlike any regular data-sharing agreements, the one signed by the seven micro-finance institutions would guide lenders in their credit decision-making. The agreement also provides for the assistance of financially troubled micro-enterprises.

Alip said the credit bureau would have a partner organization focusing on helping rehabilitate problematic micro-enterprises.

“Under our agreement, there will be no blacklisting of clients. Instead, a rehabilitation company will be created to help [financially troubled] clients,” Alip said during the launching of the MiDAS held on Tuesday, at the BSP headquarters in Manila.

In the meantime, the central bank is looking at a favorable outlook for microfinance lending for 2012, especially with the creation of the credit bureau.

At the sidelines of the program, BSP Deputy Governor Nestor Espenilla Jr. said micro-finance loans would likely be robust in 2012 in that it could potentially match the double-digit pace of growth projected for lending to large enterprises and conglomerates.

The banking industry expects growth in lending to big businesses to stay well above 10 percent this year.

“We expect microfinance loans to increase this year and to match the growth in regular lending,” Espenilla said.

“The credit bureau will help boost credit to micro-enterprises,” the central bank official added.

Outstanding microfinance loans in the country currently stand at about P7 billion and cover nearly 1 million clients.

There are about 200 banks and credit institutions in the country that engage in microfinance.